FSA lays down law on consumer credit
The regime is tailored to address the risks that face consumers without putting undue burdens on firms.
Martin Wheatley, Financial Conduct Authority chief executive 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.”
Wheatley said the FCA will focus its efforts on the areas of highest risk and ensure it uses its resources sensibly and proportionately.
He added: “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.”
The Government announced earlier today that it would transfer responsibility for regulating consumer credit from the Office for Fair Trading to the Financial Conduct Authority by 1 April 2014.
The 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 owing to rule making powers which include product banning.
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 and credit broking, such as where retailers and motor dealers introduce customers to lenders.
And the FCA will have the power to require firms to reimburse consumers when they have lost out due to a firm’s actions.
Wheatley said: “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.”
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.
They will have to provide limited information and pay a one off fee.
Existing OFT licences will lapse on 31 March 2014 and FCA interim permissions will begin from 1 April 2014.
The interim permission regime will end in 2016 and firms need to be fully authorised by that time.