finance-law.info

FCA: new consumer credit information sheets

When debtors or hirers are sent notices of sums in arrears under section 86B or 86C of the Consumer Credit Act, included with the notice must be a copy of the current "arrears information sheet".  Also, a default notice (under sections 87 and 88 of the CCA) must include a copy of the current default information sheet. 

The FCA has published updated versions of the arrears and default information sheets which will take effect from 1 April 2014.  

In addition, it will be producing two new variants of the information sheets.  These are as follows:

1. "High-cost short-term credit providers will need to provide an Information Sheet, including information on free debt advice, before a loan is rolled over".  The publication date of this sheet is expected to be on 1 April 2014, with it being effective from 1 July 2014; and
2. "Peer-to-peer lending platforms will be required to provide bespoke Information Sheets to borrowers in arrears or default".  The publication date of this sheet is expected to be on 1 July 2014, with it being effective from 1 October 2014.

 This  article is a general summary only.  If you would like advice on any of  the issues raised by it, please contact us.  Please bear in mind that  the law may change from time to time and this article may not be (or  have been) updated to reflect those changes. © afl Solicitors

Is it a bird, is it a plane – No, it’s the FCA

Most of us will, by now, know something about the major reforms to the UK financial services
regulatory structure that are on the horizon.  Under these changes, the FSA will cease to exist in its current form; three new regulatory bodies are being established.  These are the Financial Policy Committee(“FPC”), the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”). 

The FCA’s activities will include regulating the conduct of business of regulated firms in both retail and wholesale markets.  The government’s intention is that the FCA will have a more proactive and
interventionist approach to conduct regulation than the FSA.  Parts of this approach include: an increased ability to intervene before a product is launched or shortly after it is launched, without waiting for consumer detriment to arise; using its powers to require a firm to withdraw or amend a misleading financial promotion with immediate effect; and responding to issues brought to its attention in super-complaints made by designated consumer bodies.

The government has also indicated its intention to transfer responsibility for regulation of
consumer credit from the Office of Fair Trading (“OFT”) to the FCA.  There is an expectation that this will happen in 2014.  If, however, it is decided that an appropriate model for consumer credit regulation under FSMA and the FCA cannot be delivered, there will be an enhancement of the existing model of regulation under the Consumer Credit Act.  Most brokers currently hold a consumer credit licence issued by the OFT.  Once under the umbrella of the FCA, the procedure for authorization of consumer credit businesses could be similar for other FSA regulated businesses.  Concern has been expressed about whether the changes would mean greater scrutiny and a more detailed process when applying for CCA licences.

So, is it just a case of business as usual?  In a speech at the FSA’s Enforcement Conference last year, Martin Wheatley, CEO designate of the FCA said, “There have been concerns that the FCA may be heavy handed when using these new powers.  But the point I would like to stress is that while we will have these new powers, they won’t always be the first thing we reach for.  We will continue to work with firms to ensure they are clear about our expectations and how they need to behave.  However, we will use these powers when needed – they aren’t just window dressing.”

 This  article is a general summary only.  If you would like advice on any of  the issues raised by it, please contact us.  Please bear in mind that  the law may change from time to time and this article may not be (or  have been) updated to reflect those changes. © afl Solicitors

OFT powers: requirements imposed on Wonga

Under the Consumer Credit Act 1974 (the CCA), where the OFT is dissatisfied with any matter in connection with a business, it may impose “requirements” on the licensee. These requirements may require a business to do or not to do anything specified to address the OFT’s dissatisfaction. Failing to comply with a requirement can lead to a fine of up to £50,000 being imposed per instance.  The OFT’s Debt Collection Guidance sets out the standards that the OFT expects of all business engaging in the recovery of consumer credit related debts (not only traditional debt collectors, but also creditors, law firms and tracing agents).

On 22 May 2012, the OFT issued a press release relating to it having imposed requirements on Wonga.com Ltd (Wonga) following statements made by Wonga to customers in written communications and a call script. 

Apparently, the written correspondence “without having appropriate justification...suggested that customers may have committed fraud and that Wonga would consider contacting the police if customers did not act as Wonga requested.  The wording in the call script stated that customers with jobs in the public or financial sectors should not find themselves in debt, and that this was stated in their terms of employment”. 

The OFT press release states that the letters and e-mails were sent to customers who had claimed money back from Wonga by asking their card providers to reverse a payment made to Wonga, and also to some customers who had entered into debt management plans. 

The note of the determination, made on 21 May, requires that Wonga not in any communication
with a debtor, allege that the debtor has, or may have, engaged in criminal conduct or refer to the consequences of such conduct “unless it has after reviewing the individual facts and circumstances of the case in question, concluded that there are reasonable grounds for it to believe that such debtor has, or is likely to have engaged in the relevant criminal conduct...”.  It must also not state that a customer should not be in debt if the customer has a certain employment or for another reason which does not prohibit the debtor being in debt.

According to an article in the Telegraph, Wonga is appealing the “OFT’s decision to publicly criticise it on the basis that it has already promised not to repeat the practices”.

This  article is a general summary only.  If you would like advice on any of  the issues raised by it, please contact us.  Please bear in mind that  the law may change from time to time and this article may not be (or  have been) updated to reflect those changes. © afl Solicitors

Consumer credit reform: where are we now and what's on the horizon?

The past year has seen considerable change to consumer credit legislation and there is much more to come.  Now is an opportune time to briefly review where we have reached in terms of Consumer Credit Act reform and what is on the horizon. 

Already here - is your business complying?

The following changes have already taken effect:

·   1 October 2006 - the period allowed to customers under agreements regulated by the Consumer Credit Act to comply with default notices was extended from 7 days to 14 days.  Default notices should have been amended to reflect this.

·   6 April 2007 - change to the definition of “individual” for the purposes of the CCA.  From this date, new credit and hire agreements with partnerships of more than 3 people are no longer regulated by the CCA. Operational procedures (and, depending on their terms, forms of agreement) should have been modified to take account of this.

·   6 April 2007 - good news for creditors.  Previously, in some circumstances, a court could not make an “enforcement order” to allow an agreement to be enforced where the agreement did not comply with certain CCA requirements.  This automatic unenforceability has been abolished in relation to agreements made on or after 6 April 2007.  Courts now have discretion as to whether to allow enforcement in these situations as well.

·   6 April 2007 - “unfair relationships” provisions came into force for new credit agreements.  Subject to limited exceptions, these apply to all new agreements with individuals (including sole traders and partnerships of 3 people or less) irrespective of the amount of the credit being provided.  They allow the court to make a wide range of orders where it determines that a relationship is unfair, including requiring repayment of any sums paid by the debtor.

The new unfair relationship provisions - implications for business regulated and unregulated by the Consumer Credit Act

New ‘unfair relationship’ rules are intended to make it easier to challenge unfairness in relation to credit agreements.

From 6 April 2007, these provisions – with one limited exemption - will apply to all new credit agreements with individuals, irrespective of the amount of the credit being provided¹.  This includes agreements with sole traders and partnerships with three or less partners.  They will not apply to hire or lease agreements (but will, for example, apply to hire-purchase and conditional sale). 

For agreements made before 6 April 2007, the new rules will apply from 6 April 2008, unless the relevant agreement has been completed before then. 

Why should this matter to creditors?

These changes are significant for creditors because where a court determines that a relationship is unfair, it can make a wide range of orders.