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10/3/13 - UK’s FCA Unveils Regulatory Regime for Consumer Credit

The UK Financial Conduct Authority on Oct. 3 released a detailed look at how it will regulate consumer credit when it assumes regulation of the industry on April 1, 2014. In a series of releases, the agency and its CEO, Martin Wheatley, explained the guiding philosophy behind the new regulatory regime, the proposals it is considering, and the best way to achieve a smooth transition from the current regulator of consumer credit, the Office of Fair Trading.

“We have put the spotlight on payday and other high-cost short-term lending because we must take action to help those consumers most at risk,” Wheatley said in a foreword to the FCA’s 193-page consultation paper.“Our message to any company that harms their customers – the clock is ticking.” The paper includes a review of the detailed proposals the FCA is considering. Comments on the paper are due by December 3. Annexes to the paper include questions it is currently considering, cost-benefit and equality-impact assessments, and a list of non-confidential respondents to date. The release also included a timeline of expected actions, and described additional consultation papers on fees and their calculation; crowd funding; plain-language guidance; and other changes to the FCA handbook.

The authority said in a press release that the documents distributed today “set out its vision for the regulation of consumer credit.” The FCA says “The proposed regime will allow the FCA to provide stronger protection and better outcomes for consumers than the existing OFT regime. There will also be tougher requirements for payday lenders, including a mandatory affordability check on borrowers, limiting the number of loan roll-overs to two, and restricting (to two) the number of times a continuous payment authority (CPA) can be used. There will also be tighter restrictions on what payday lenders can say in adverts, while the FCA will be able to ban any that are misleading.”

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Please contact Stuart King (+44 207 997 3402) for further information on Promontory’s view of these developments.