FCA Issues Consultation Paper on its Regime for Consumer Credit

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On 1st April 2014, the Financial Conduct Authority (FCA) is set to take over the regulation of the consumer credit industry from the Office of Fair Trading (OFT).  Prior to that date the FCA has produced a consultation paper inviting feedback from firms on its proposed approach.

The FCA’s proposed approach is intended to make the transition for firms involved in consumer credit as striaght-forward as possible ensuring effective regulation and that those posing a higher risk to consumers are subject to enhanced supervision.  The key to the FCA’s success will surround whether it delivers on its promise to deal with potential or actual problems both ‘quickly and robustly’, while ensuring that there is effective competition between firms in the interests of consumers.

Much has been made in the press of the FCA’s intended crack-down on payday lending, having been identified as a particularly high risk area.  These types of loans can sometimes offer benefits to consumers in difficult financial situations and will not be abolished under the FCA’s regime.  The FCA’s concerns surround the potentially misleading nature of the payday loans emphasising the speed and simplicity of the loan while failing to adequately assess the affordability to the consumer.

Amongst others, the consultation paper (http://www.fca.org.uk/your-fca/documents/consultation-papers/cp13-10) will be of particular interest to firms currently holding consumer credit licences issued by the OFT under the Consumer Credit Act, those that are considering carrying out credit activities and consumer organisations.  The FCA is inviting responses until 3rd December and plans to make its final rules in February or March, giving firms the chance to familiarize themselves with them ahead of the transfer.

For advice on consumer credit contact the Forbes Solicitors business law team or call 01254 222399.

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