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Consumer credit policy

Ed SmithHead of Banking, Lending and Protection

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Journey so far

FCA took over regulation of consumer credit on 1 April 2014

• Over 50,000 regulated firms• Large and varied market• Different sectors, different profiles

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Journey so farA new regulator, with flexible rule making powers. We have focused on establishing new rules where risks are highest

• New rules on high-cost short-term credit• The price cap• New rules for debt management firms• New rules on credit broking

Novel uses of data to understand markets

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Current policy consultation

Published on 24 February – CP15/6

We are consulting on: • clarifications to ensure our rules and guidance

reflect our policy intention, and • address new issues which have become

apparent since taking over regulation of consumer credit.

Deadline for responses 6 May. Policy statement expected in summer

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Credit broking

• New rules on credit broking from 2 January

• Introduced without consultation given evidence of significant

consumer harm

• Explicit process of notice and acknowledgement before a broker

can charge a fee

• Retain records in a durable medium

• Transparency about the firm’s status

• We are now consulting on whether to retain or modify the rules

• We are also proposing minor changes to other CONC rules on

credit broking

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Credit broking

We are also using the consultation paper to invite views more generally on broker remuneration

In particular, we would welcome views on the following:

• Pros and cons of remuneration by fee or commission

• The risks to consumers, and how these can be mitigated

• Whether enhanced disclosure requirements are needed

• Whether to ban brokers from charging a fee

(i) before an introduction, or

(ii) before a credit agreement

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Guarantor loans

A guarantor is typically a family member or friend

Currently a guarantor does not have the same protections as the borrower

We propose to change that, in four key areas:

• Extending our main high-level Principles to guarantors

• Requiring an adequate pre-contract explanation to the guarantor

• Requiring an assessment of the guarantor’s creditworthiness (as

well as the borrower’s)

• Requiring firms to treat guarantors fairly if they are in financial

difficulties and unable to pay

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Financial promotions

We are proposing a number of changes to our financial promotions rules

• To remove the exemption from the requirement to include a risk warning for high-cost short-term credit

• To elevate guidance on ‘clear, fair and not misleading’ to a rule

• To amend the rules on relative prominence so that information is ‘no less prominent’

• To clarify the triggers for the representative APR

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Debt related proposals

Using continuous payment authorities (CPAs) as a debt collection mechanism

• CPA can only be used if it is provided for in the credit agreement

• We are proposing to allow firms to introduce CPA to collect repayments

where a customer is in arrears or default and the lender is exercising

forbearance

Debt advice in a durable medium

• Our rules require that debt advice be provided in a durable medium.

• We are proposing to amend our rules so that debt advice is only required

in a durable medium if the firm is likely to enter a contract with the

customer

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Feedback and next steps

Consultation period closes 6 May

http://www.fca.org.uk/your-fca/documents/consultation-papers/cp15-06-response-form

Nick WaughFinancial Conduct Authority25 The North ColonnadeCanary WharfLondon E14 5HSEmail: cp15-06@fca.org.uk

We will take feedback into account and publish final rules in the summer.

Any questions?