The pressure to reform the out of date legislative landscape for consumer credit in the UK intensifies. Since the FCA’s review of the retained provisions of the Consumer Credit Act 1974 (CCA) in 2019 there has been no substantive change and so the pressure for reform from the consumer finance industry and it’s trade associations continues to gather momentum. We understand that on 8 December 2020, the Finance & Leasing Association and other trade bodies including the Consumer Credit Trade Association, the Association of Alternative Business Finance and the British Vehicle Rental & Leasing Association sent a briefing paper called Consumer Credit Act – the case for reform to the Economic Secretary to the Treasury, John Glen MP calling for reform of the CCA.
The paper notes that the current legal and regulatory regime for consumer credit "is complex, out-of-date, inflexible and hard to navigate" referring to 27 statutory instruments made under the CCA, various consumer protection legislation, FCA rules, Payment Services Regulations 2017 and FSMA legislation.
The suggestion for a more simple FCA Rules and FSMA based approach after the UK ceases to be bound by the Consumer Credit Directive next month has been put forward with the aim to create a modern CCA regime, to better serve the evolving demands of the modern consumer and the businesses operating in this market.
The trade bodies have offered to host roundtable discussions where industry and consumer representatives could devise a comprehensive strategy for CCA reform with HM Treasury and the Financial Conduct Authority.
The paper provides examples of various inadequacies with the current regime and proposes improvements which include:
- simplification of the consumer credit legislative landscape via a twin-track approach of the Financial Services and Markets Act 2000 (FSMA) and Financial Conduct Authority (FCA) rules;
- streamlining unsympathetic forbearance measures, to give borrowers the help and information they need promptly and in a transparent manner;
- modernising the prescriptive requirements for giving consumers arrears and default notices;
- simplifying the pre-contractual information that is required to be given to consumers prior to entering into an agreement, so this can more easily be provided through digital channels;
- developing a more agile approach to cater for the evolution in consumers use of credit and hire products, aligning hire and credit documentation requirements and the levelling up of consumer hire protections with those provided for credit; and
- re-balancing of the sanctions faced by creditors for non-compliance of certain CCA provisions so that these are more proportionate to the harm that has been caused to the borrower.
Should you wish to discuss CCA reform in further detail, or require consumer finance legal or regulatory advice, we would be pleased to hear from you.