All change for consumer credit guidance?

All change for consumer credit guidance?

What could a new Financial Conduct Authority (FCA) consultation on amendments to its consumer credit regime mean in practice? Harriet Milburn of Addleshaw Goddard LLP examines the detail of the proposals.

Original news

FCA proposes consumer guidance changes, LNB News 24/02/2015 79

Proposals on changes to consumer guidance on credit broking, guarantor lending, high-cost short-term credit, financial promotions, arrears, default and collection and mortgages are set out in a consultation from the FCA. The changes aim to address potential areas of harm to consumers. Other changes include clarifications and amendments to ensure the FCA’s rules clearly reflect its policy intention, and issues raised by firms and other stakeholders. Comments are requested by 6 May 2015.

What are the FCA’s proposals in this consultation?

The FCA proposes changes to the rules and guidance in CONC (and some other chapters of the handbook), ranging from minor clarificatory updates to more significant amendments that will require widespread process or documentation changes. The main areas of change fall into four categories: lending (including new requirements for firms to provide pre-contract information to and to assess the creditworthiness of guarantors under the relatively new concept of ‘guarantor loans’), financial promotions (including the removal of the exemption from the high-cost short-term credit risk warning and amendments to rules around prominence), debt management and arrears (allowing firms to introduce a continuous payment authority when exercising forbearance without the requirement for a regulated modifying agreement) and changes made necessary by the upcoming implementation of the Mortgage Credit Directive 2014/17/EU. The FCA also uses the consultation to seek views on whether to retain or amend the new rules in relation to credit broking that were introduced in January 2015 through PS14/18.

What is the purpose of the proposals?

The purpose of the proposals is to address concerns and queries that have arisen since the transfer of credit regulation from the Office of Fair Trading to the FCA in April last year. Following nearly one year of regulating of the credit market,

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