The UK Government has said it will change the law so prepayment schemes like Christmas savings clubs have to safeguard customers’ money, protecting consumers’ cash as they save for the holidays. The change will prevent scandals like Farepak happening again, where tens of thousands of people, many on low incomes, lost all they had saved for Christmas when the company went bust.

For the used car and home improvement sectors, where consumers often make large, important one-off purchases, the government will make it mandatory for businesses to take part in arbitration or mediation where disputes arise over a transaction. This means both sides won’t get dragged through the courts and levels the playing field for decent businesses who are doing the right thing.

The UK Government has also claimed that it is clamping down on subscription traps by requiring businesses to make it clear exactly what consumers are signing up for and letting them cancel easily, to ensure people can spend their hard-earned cash with confidence.

The consumer catfishes behind bogus online ratings will also be targeted by rules that make it automatically illegal to pay someone to write, or host, a fake review.

The government has said that it will help regulators stamp out other dodgy tactics used to dupe online shoppers. These include ‘dark patterns’ that manipulate consumers into spending more than they wanted to, and ‘sludges’, negative nudges such as when businesses pay to have their product feature highly on a trader’s website while hiding the fact they paid for it.

Business secretary Kwasi Kwarteng said: “The UK’s economic recovery relies on the strength of our open markets and consumers’ faith in them.

“By delivering on our commitment to bolster our competition regime, we’re giving businesses confidence that they’re competing on fair terms, and the public confidence they’re getting a good deal.

“The proposals come in the new consultation on Reforming Competition and Consumer Policy, which delivers on the government’s manifesto commitment to “give the Competition and Markets Authority enhanced powers to tackle consumer rip-offs and bad business practices.”

Tough penalties for non-compliance are being put forward, with new powers for the Competitions and Markets Authority (CMA) and similar enforcers to hit unscrupulous traders who breach consumer law with fines of up to 10% of their global turnover, and civil fines for businesses who refuse or give misleading information to enforcers.

The government is also considering several options – including introducing financial penalties – when firms breach the commitments given to enforcers that they will change their ways.

To speed up processes, the CMA will also be able to enforce consumer law directly rather than having to go through a court process that can take many months or even years – meaning consumers are protected more quickly.

The consultation also sets out new and enhanced powers for the competition watchdog to help drive innovation, productivity and growth. Under the plans, the CMA will be able to wrap up investigations faster and impose stronger penalties on firms that break the law or fail to cooperate with the regulator’s work.

Andrea Coscelli, chief executive at the CMA, said: “Competitive, well-functioning markets are the cornerstone of a thriving economy, and they require constant vigilance to maintain.

“These proposals take forward many of the CMA’s suggestions for a swifter, stronger and more flexible competition and consumer protection regime, which will protect consumers and enable businesses to grow and thrive.”