FSA UK consults on framework for consumer credit regime
Date: Mar 19, 2013
Categories: Risk and Regulation
Keywords: FSA UK
March 6th 2013 - The Financial Services Authority (FSA) has published its consultation on how it plans to introduce a strong and flexible regime to regulate consumer credit. The regime is tailored to address the risks that face consumers without putting undue burdens on firms.
The Government announced earlier today that it would transfer responsibility for regulating consumer credit from the Office for Fair Trading (OFT) to the Financial Conduct Authority (FCA) by 1 April 2014. The Government has also published a consultation on the legislative changes needed to transfer responsibility to the FCA.
The FSA’s consultation sets out the overall approach and framework for the regime that will be administered by its successor body the FCA. The framework will enable the FCA to deliver better outcomes for consumers than the existing regime with the following tools:
- Increased flexibility e.g. rule making powers, including product banning;
Martin Wheatley, FCA CEO designate, said: “Consumer credit inhabits every corner of our day to day financial lives. It is a broad church spanning everything from overdrafts to hire purchase to credit cards to debt advice, provided by tens of thousands of firms of all shapes and sizes.
“We will focus our efforts on the areas of highest risk, and ensure we use our resources sensibly and proportionately. The work we have done with consumer groups and trade bodies has helped us reach this point and will continue to help us make the transition as smooth as possible.
“This regime is a sensible approach to everyday finances. It will give consumers the protection they expect without placing an undue burden on the firms that service them.”
The new regime will be designed to focus resource on higher risk firms, such as pay day lenders, pawnbrokers, credit reference agencies and debt collection. Lower risk firms will not have to meet such onerous standards and will pay lower fees. These firms include not-for-profit debt counselling, businesses providing lending as a side activity (e.g. a sports club that allows its members to pay by instalment). It also includes credit broking, such as where retailers and motor dealers introduce customers to lenders.
There is a short timetable to the transfer and the FSA is keen to make the transition as straightforward as possible. This means that there will be a phased approach to the transfer, with an interim period starting in April 2014 and moving to full implementation by April 2016.
- From Autumn 2013, existing OFT licence holders can apply for interim permission so that they can continue to operate;
Re-disseminated by The Asian Banker