On 1 April 2014 we will take over the regulation of the consumer credit industry from the Office of Fair Trading. We are now consulting on the detailed proposals for how we will do this.
Why are we publishing this consultation paper?
In FSA CP13/7 we consulted on our high-level proposals for consumer credit firms. Based on the feedback we received we have finalised our proposals and made rules to apply the high-level standards in our Handbook to consumer credit firms.
Who should read this paper?
The majority of adults in the UK are customers, or potential customers, of financial services firms. So anyone may be interested in commenting on how we propose to regulate consumer credit firms.
In particular our proposals will interest:
- firms that currently hold individual or group consumer credit licences issued by the OFT under the Consumer Credit Act (CCA)
- firms that are considering carry out consumer credit activities, including debt recovery agents
- firms that want to carry out consumer credit activities in future
- trade bodies representing consumer credit firms
- consumer bodies
- firms offering high-cost short-term loans (payday lenders)
- not-for-profit bodies providing debt advice
- debt management firms
- other bodies currently involved in regulating consumer credit, including the Local Authority Trading Standards Services and the Department of Enterprise, Trade and Investment (Northern Ireland)
Summary of our new proposals
We are consulting on the following main areas.
- How we propose to carry across the provisions of the Consumer Credit Act (CCA) that will be repealed in April 2014, and OFT guidance (including in relation to responsible lending, affordability assessments and debt collection), into our rules and guidance (Chapter 5)
- Requirements relating to the people who run your business and are responsible for certain aspects of it. These are called ‘approved persons’ (Chapter 3) (you should note that the Parliamentary Commission on Banking Standards (PCBS) made recommendations on changing the approach to ‘approved persons’ in general, so these proposals may change in the future).
- New rules for high-cost short-term credit (ie payday loans), to address concerns about how this market is operating (Chapter 6)
- Prudential and conduct standards for debt management firms, including the minimum capital that they will have to hold and how they should separate their customers’ money from their own (Chapters 7 and 9)
- What information and how frequently firms will have to report to us, including on complaints (Chapters 4 and 11)
- Our approach to enforcing the retained CCA provisions (Chapter 5)
- Our approach to applying our rules regarding becoming an appointed representative for an authorised firm (Chapter 3)
Our policy statement PS13/8 (August 2013) included rules carrying across some CCA secondary legislation, relating to exemptions and total charge for credit.
High-level standards we have confirmed
Our main paper also includes a policy statement confirming changes to our high-level standards, on which we consulted earlier in the year in CP13/7.
FCA principles
Our 11 fundamental principles that firms must comply with at all times will apply to all authorised consumer credit firms and those with interim permission.
Most will be familiar for well-run firms as they are generally similar to concepts the OFT applies when deciding whether to grant a consumer credit licence, and to those set out in OFT guidance.
Systems and controls rules
These expand on one of our principles, Principle 3, which states that a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
We will apply these systems and controls rules to all authorised consumer credit firms and those with interim permission, although there will be some exceptions.
Disclosure wording
We have set wording that firms will need to use to make it clear to consumers that they are regulated by us.
For more details see Part B of our full paper.
Consultation paper
CP13/10 - Detailed proposals for the FCA regime for consumer credit:
What are the next steps?
Our consultation CP13/10 Detailed proposals for the FCA regime for consumer credit is now closed. We are currently considering responses and we will be publishing a Policy Statement and final rules in February/March 2014.
If you have any general comments not related to specific proposals please email us at: [email protected]
We will review all your responses and publish our feedback. You can find more information on our expected consumer credit publications in Chapter 13.
Want to find out more?
For more information:
- How we plan to regulate consumer credit firms and what that means for you
- Frequently asked questions
- Cost-benefit analysis of the FCA's Detailed Proposals for a new Consumer Credit Regime[4]
- Our 11 principles for businesses[5]
- Consumer credit licence holders: population sizing & communications research - key findings[6]
- Consumer credit licence holders: population sizing & communications research - technical report[7]