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The future of consumer credit and

payday regulation

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Consumer credit regulation is changing

April 2014• The Financial Conduct Authority takes over

consumer credit regulation from the OFT

• This creates a single regulator for conduct in retail financial services

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The journeyConsultation paper 1

March 2013

Consultation paper 2October 2013

FCA CC regime commences (Interim

Permission)April 2014

End of Interim Permission period

March 2016

Final rules publishedFebruary 2014

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About the FCA

The FCA’s objective is to make markets work well for the consumer:

• Consumer protection• Competition• Market integrity

Firms are expected to put consumers at the heart of their business

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What we do• We authorise – firms and individuals can only

carry out regulated financial services if they are authorised by us

• We supervise – depending on the size and nature of the business

• We enforce – when firms and individuals don’t play by the rules

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Consumer credit - our aim“A market that works well for consumers and for firms will be of benefit to everyone and to the UK economy.”

“…create a regime that protects consumers and allows business to operate.”

Martin Wheatley, Chief Executive

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3 October 2013 – Consultation published

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Our proposals• Affordability checks for every credit agreement• All advertisements and promotions must be

clear, fair and not misleading• Standards for firms to get through the

authorisations gateway• Reporting requirements for firms• Firms doing higher risk business and pose

greater risk to consumers will face tougher supervisory approach

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Our proposals• Debt management firms and some not-for-

profit advice bodies will have to hold specific amounts of capital

• Debt management firms to spread fees to allow creditors to be paid back from the start

• Consumers will continue to have access to FOS, but no plans to include consumer credit under FSCS

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Payday

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Our aims for payday• Ensure firms only lend to borrowers who can

afford it

• Increase borrowers’ awareness of costs & risks

• Increase awareness of ways to get help

• Tackle bad practices, ensure consumers are treated fairly and given forbearance when needed

• Improve dialogue between lender and borrower

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Our proposals – high-cost short-term• Affordability checks

• Rollovers limited to two

• Continuous payment authorities limited to two

• Payday lenders must inform customers of free debt advice before refinancing

• Risk warnings on loan adverts

• Minimum stds for advertising and cold calling

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The Competition Commission review• We see our proposals as complementary

• We believe our proposals will be pro-competitive overall

• We continue to work closely with the CC

• We will reflect on CC’s findings and assess whether further rule changes are needed

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Why not go further?• Our proposals address the problems as we see them, based on

evidence we have

• Proposals work as a package

• Proposals are proportionate and will deliver considerable benefits for consumers overall

• We will monitor firms and keep options under review (including real time data sharing)

• Our proposals puts firms on notice!

• We welcome views on our assessment of the issues and proposed solutions – have we got it right?

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What about interest rate / cost of credit caps?• We have the legal power – useful to have

• The Bristol Report suggests caps could have unintended adverse impacts on consumers

• We have committed to looking at this in detail after April, collect the evidence, and consult fully

• We will look at outcomes of caps in other jurisdictions

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We want to hear from you

• Tell us what you think of our proposals before 3 December

• You can find our consultation on www.fca.org.uk

• We want your feedback