The FCA has published Policy Statement 14/3: Final rules for consumer credit firms (PS14/3).
In PS14/3, the FCA sets out its final Handbook rules for consumer credit firms. The new rules will result in changes for how firms offering high-cost short-term credit (HCSTC firms) and debt management companies treat their customers including for HCSTC firms’ mandatory affordability checks for borrowers and the FCA having the power to ban any misleading adverts issued by them.
On pages 10 and 11 of PS14/3, the FCA have inserted two tables that set out at a high level which of its key consultation proposals have not been changed. These include:
- consumer credit firms carrying on lower-risk activities can apply for ‘limited permission’ from the FCA;
- consumer credit firms can be appointed representatives;
- standards for financial promotions will be aligned with the FCA’s existing regime, including the requirement to be clear, fair and not misleading;
- there will be a limit of two unsuccessful attempts to seek payment using a continuous payment authority (CPA), which can be reset subject to strict conditions;
- loans can be rolled over twice and borrowers must be informed about sources of debt advice before a loan is refinanced;
- prudential requirements will apply to debt management firms and large not-for-profit advice bodies, reflecting the size of their ‘debts under management’; and
- from 1 April 2014 all consumer credit firms must comply with the FCA’s high-level standards – the Principles for Businesses, the relevant systems and controls rules, and some general provisions including status disclosure rules.
Changes made to the FCA’s consultation proposals include:
- some specific OFT guidance is to be carried across as guidance rather than rules; other drafting changes have been made to reflect the OFT’s wording more closely or provide further clarity;
- guidance has been added that debt management firms should not allocate more than half the money received from customers in debt management plans to meeting their fees and charges;
- the wording of the risk warning that must appear in advertisements from HCSTC firms has been amended; and
- amendments to the rules on the use of CPAs have been made to (among other things) make clear how they apply to instalment loans and single payments separately agreed by the customer.
View FCA confirms tough new rules for £200bn consumer credit market, 28 February 2014
View Policy Statement 14/3 – detailed rules for the FCA regime for consumer credit including feedback on FCA QCP 13/18 and ‘made rules’, 28 February 2014