GUIDANCE CONSUMER CREDIT REGULATION DATE OF ISSUE APRIL 2014

Transcription

1 GUIDANCE CONSUMER CREDIT REGULATION DATE OF ISSUE APRIL 2014

2 CONSUMER CREDIT TRANSITIONAL ARRANGEMENTS Guidance to Regulation 4.3 The following guidance is provided to help firms comply with regulation 4.3. During the transitional period between 1 April 2014 and 30 September 2014, consumer credit firms carrying on credit-related regulated activities and connected activities are required to comply with the OFT guidance and other provisions listed in the transitional provisions in the FCA s Consumer Credit Sourcebook (Rule 1.3R) and with the provisions of the Consumer Credit Act 1974 and the related secondary legislation made under that Act remaining in force. These provisions should not impose any new obligations. Firms should already be complying with them under the terms of ICAS s group consumer credit licence. In regulation 4.3: A connected activity is an activity that is connected to a credit-related regulated activity but that is not a credit-related regulated activity. It is highly unlikely that the transitional provisions involve requirements in relation to professional services such as accountancy, taxation and audit. The appropriate modification is that consumer credit firms will need to adopt a common-sense approach to interpreting the transitional provisions, for example, references to the OFT in these provisions and guidance should be read as if they referred to the FCA and references to the relevant supervisory authority means ICAS. The provisions of Rule 1.3R and the provisions of the Consumer Credit Act 1974 which are relevant to consumer credit firms carrying on credit-related regulated activities are listed below. Firms need to consider if this material is relevant to the credit-related regulated activities that they undertake. 1. Irresponsible lending OFT guidance for creditors (OFT reference number 1107) This guidance provides greater clarity for businesses and consumer representatives on the business practices that the OFT considers may constitute irresponsible lending practices. It indicates types of deceitful, oppressive or otherwise unfair or improper business practices which, if engaged in by a firm, could call into consideration its fitness. 2. Debt management (and credit repair services) guidance (OFT reference number 366 rev) This guidance applies to persons who provide debt advice, debt management and/ or credit information services. Firms should be aware that the consumers they come into contact with in connection with these activities may tend to be overindebted, vulnerable, in need of help and/or may have restricted options available to them. When providing services to such consumers in particular, regard for their best interests should be a paramount consideration; and the commercial interests of a business should never be prioritised to the detriment of the consumer. Also, providers should ensure they are transparent and fair in their dealings with consumers. 1

3 3. Credit brokers and intermediaries OFT guidance for brokers, intermediaries and the consumer credit and hire businesses which employ or use their services (OFT reference number 1388) As far as credit brokerage is concerned, this guidance sets out the standards the OFT would expect in terms of fitness to hold a consumer credit licence covering the category of credit brokerage. The guidance sets out types of behaviour that the OFT considers to constitute unfair or improper behaviour. 4. Mental capacity OFT guidance for creditors (OFT reference number 1373) This provides guidance for creditors on mental capacity in the context of responsible lending and borrowing decisions. It sets out what the OFT would expect from creditors in terms of dealing appropriately with borrowers under circumstances in which it is understood or suspected that the borrower has, or may have, some form of mental capacity limitation that might constrain their ability to make an informed borrowing decision. 5. Debt collection OFT guidance for businesses engaged in the recovery of consumer credit debts (OFT reference number 664Rev2) This guidance sets out the standards that the OFT expects of businesses engaged in the recovery of consumer credit debts. It identifies the behaviours that the OFT considers to fall within the category of unfair or improper business practices and which, if engaged in, would call into question a firm s fitness. Debt collection is not a credit-related regulated activity that can be undertaken by a consumer credit firm. A firm may, however, take action to recover its own debts that are consumer credit agreements and so this guidance applies to that action. 6. Guidance on sections 77, 78 and 79 of the Consumer Credit Act 1974 the duty to give information to debtors and the consequences of non-compliance on the enforceability of the agreement (OFT reference number 1272) The Act refers to the duty of the creditor and owner under these sections to provide information and this guidance constitutes the OFT s views on relevant unfair business practices and the standards to be expected when dealing with debtors and hirers and their requests for information under these sections. 7. Consumer Credit Act 1974 Part IV Advertising Sections Deal with the matters that must be included in advertisements published by a business indicating that it is willing to: advise on debts; engage in transactions concerned with the liquidation of debts; provide credit information services; provide credit; or hire out goods. 2

4 Part V Entry into credit or hire agreements Sections Preliminary matters before entry into credit or hire agreements such as disclosure of information, explanation of agreement and assessment of creditworthiness. Sections Matters related to the making of the agreement such as the form and content of the agreement. Sections Early withdrawal and cancellation of consumer credit agreements. Part VI Matters arising during currency of agreements Sections Matters such as duty to give information, liability of creditor, variation of agreement, etc. Sections 86B-86F Deal with sums in arrears and defaults. Part VII Matters relating to default and termination of agreements Sections Need for and content of a default notice. Sections 90-93A Restriction on remedies for default. Sections 94-97A Deal with early repayment. Sections Deal with terminations of agreements. Part VIII Security Sections Deal with form and content of securities. Sections Matters relating to pledges and pawn receipts. Sections Negotiable instruments. Section 126 Enforcement of land mortgages. 8. The Consumer Credit (Conduct of Business) (Credit References) Regulations 1977 (SI 1977/330) Sets out the disclosure requirements to an individual of any credit reference agency that was consulted if negotiations were conducted through a third party. 9. The Consumer Credit (Payments Arising on Death) Regulations 1983 (SI 1983/1554) Part V of the Consumer Credit Act 1974 (matters to be dealt with on entry into a credit agreement) do not apply to a credit agreement to finance payments connected with the death of a person and the payments are: payments of capital transfer tax; payments of certain court fees relating to a grant of representation (or in Scotland of confirmation); and payments to a surety (or in Scotland to a cautioner) in relation to certain of such grants. 10. The Consumer Credit (Conduct of Business) (Pawn Records) Regulations 1983 (SI 1983/1565) Deals with the records that a pawn business must maintain. 11. The Consumer Credit (Content of Quotations) and Consumer Credit (Advertisements) (Amendments) Regulations 1999 (SI 1999/2725) These regulations require the inclusion of certain information in quotations. A quotation is defined (subject to exceptions) as any document which gives a prospective customer information about the terms of business. 3

5 12. The Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/2013) This sets out the information that must be provided when a firm conducts business over the internet. It includes such matters as: the name of the service provider; the geographic address of the service provider; and details of any professional body with which the service provider is registered. The matters covered are similar to those required by the Provision of Services Regulations but are applied to electronic communications. 13. The Financial Services (Distance Marketing) Regulations 2004 (SI 2004/2095) These regulations apply to contracts made through distance communication, ie, if contact with the client is by letter, telephone, or other communication which is not face to face. Further details are in the DPB Handbook. 14. The Consumer Credit (Advertisements) Regulations 2004 (SI 2004/1484) and 2010 (SI 2010/1970). These regulations concern the content of advertisements for credit or consumer hire agreements. CA House 21 Haymarket Yards Edinburgh EH12 5BH enquiries@icas.org.uk +44 (0) icas.org.uk