On 28 September, the FCA published its policy statement (Consumer credit – feedback on CP 15/6 and final rules and guidance). This was in response to its consultation in February 2015 on proposed changes to its rules and guidance on consumer credit in relation to credit broking, lending, financial promotions and debt.
In relation to credit broking, the consultation was on whether to retain the rules published in PS14/18, which came into effect on 2 January, but with small modifications and some minor additional rules on the wider issues of remuneration, disclosure of fees/commissions and timings of fee payments.
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The FCA had introduced the new rules without prior consultation because it considered that the delay in consulting would be prejudicial to the interests of consumers.
In brief, the rules in PS14/18 provide that:
Credit brokers are banned from charging fees to customers, and from requesting customers’ payment details for that purpose unless they meet FCA requirements.
Credit brokers must make sure customers are given clear information about who they are dealing with, what fee will be payable, when and how.
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By GlobalDataFee-charging brokers need to notify the FCA, quarterly, of the websites they operate.
All brokers will need to include their legal name (as it appears in the FCA Register) in all advertising and all correspondence with customers.
Advertising must clearly state that the firm is a credit broker and not a lender; if the firm is both a credit broker and a lender, the advertising will need to make clear that they are advertising their broking services, not their lending.
PS14/18 also included additional rules on cancellation rights for distance contracts (for example, online credit broking), including rights to a refund.
The FCA’s response to the consultation confirms that it has made all but one of the rules consulted upon. The exception is the implementation of the proposal to make GABRIEL reporting of web domain names mandatory for authorised firms There will be further consideration on this.
The FCAs response also states that it considers that the introduction of the rules in PS14/18 appears to have made a significant difference and has both reduced consumer harm and equipped the FCA with stronger tools with which to challenge poor practice by firms.
In relation to the wider issues consulted on in CP15/6, the FCA considered it had insufficient information to develop an informed view on remuneration models and needed to undertake further analysis before making further proposals. As for disclosure of fees and commissions, the FCA is still considering its response to the Plevin judgment and whether to amend or extend the existing CONC rules. Further consultation can be expected in 2016.
Most of the changes referred to in the consultation as a whole came into force on 2 November with some in force from 28 September.
Greg Standing is a partner at Wragge Lawrence Graham & Co.
