Under the Consumer Credit Act 2006, which was fully implemented last year to update the Consumer Credit Act 1974, consumers have been given more transparent rights.

Rob Dobson, solicitor in the Corporate department of Lancashire law firm Napthens, warns much more onus has been placed on companies which extend credit to customers to keep in contact with them. The Act affects all who use credit to buy goods or services, including hire purchase and store cards.

Consumers will now have to be given better information about their debts, and the change in the law is beginning to bite for many in the industry.

Two of the key changes are that lenders now have to provide regular statements during the lifetime of a debt, and customers falling behind on payments must receive arrears notices.

If a business fails to supply these two pieces of paperwork, they could find themselves unable to enforce the agreement while it is completed.

Mr Dobson warned: “Much more focus is placed on the business to keep in touch with the consumer, to give proper, thorough and transparent information about their debt.

“If this is not done, the results can be serious for the company involved, as they would enter a period of non-compliance. During this time, not only would the company be unable to enforce the credit agreement, but interest would not be chargeable either.

“It is vital for businesses to keep paperwork up to date and get proper advice if they are unsure as to their responsibilities.”

The Government’s Department for Innovation and Skills says the move makes the Act ‘more relevant to today’s consumers’ by strengthening consumer rights, improving consumer credit regulation and increasing the effectiveness of regulation.