The FCA has published Finalised Guidance 17/1: Guarantor loans: default notices (FG17/1).

FG17/1 concerns the FCA’s interpretation of the requirement in section 87 of the Consumer Credit Act 1974 to serve a default notice before the creditor (or owner) enforces a guarantee or indemnity following breach of a regulated agreement.

The FCA previously consulted on the draft guidance last October in Guidance Consultation 16/7. Our blog entry is here.

In FG17/1 the FCA reports that respondents to its earlier guidance consultation were generally supportive of its proposals but have made certain minor changes to the finalised guidance in light of certain suggestions that have been made.

Among other things in FG17/1 the FCA notes that:

  • one respondent suggested that any request made of a guarantor should be considered as ‘enforcement’. The FCA, however, disagrees with this view stating that ‘enforcement’ has to carry an element of coercion but further clarifies the distinction between a ‘demand’ for payment and a ‘request’ which makes clear that the guarantor is not required to pay; and
  • it does not consider that ‘enforcement of security’ is limited to obtaining a court judgment. In the regulator’s view ‘enforcement’ can include exercising some forms of ‘self-help’ remedy relating to security if the remedy is sufficiently coercive.

The FCA intends to keep the finalised guidance under review and may propose changes it considers appropriate in the future.

View Guarantor loans: default notices – FG17/1, 19 January 2017