Compliance Update - Consumer Credit

Posted on: 13 May 2014

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Consumer Credit

On 1st April 2014 FCA took over the responsibility for Consumer Credit regulation from the Office of Fair Trading. Although the changes are relatively minor in scope it does allow for stricter enforcement of the rules by FCA, in particular its ability to use its full range of enforcement powers against firms who fail to comply. All firms or individuals offering credit cards and personal loans, selling goods or services amongst a range of other activities must have applied for and been granted interim permission from the FCA before 1st April to be able to continue with these activities.

The main consumer credit activities which may be carried out by Brokers are lending and arranging credit

Credit is widely defined to mean any type of agreement where the lender gives the borrower time to make payment. So if customers are allowed to pay their debts to you by instalments then you may be carrying on the regulated activity of lending. If you arrange for credit to be provided by a third party premium finance company and/or insurers then you may be carrying on the regulated activity of arranging credit.

Full details of the changes and requirements are available on the FCA website.

FCA behavioural economics and competition

The Financial Conduct Authority (FCA) first explored the concept of behavioural economics shortly after its inception. At that time, two occasional papers were published; Occasional Paper 1 "Applying Behavioural Economics at the Financial Conduct Authority", and Occasional Paper 2 "Encouraging consumers to claim redress: evidence from a field trial".

In April the FCA published Occasional Paper 3, entitled 'How does selling insurance as an add-on affect consumer decisions?' This paper has gone into detail about a behavioural experiment developed for the FCA's first competition market study, which examined how consumer behaviour was affected when general insurance was sold as an add-on product to a primary purchase.

In the speech accompanying the release of this latest paper, entitled, "Making competition king – the rise of behavioural economics at the FCA", Wheatley said that the FCA would use behavioural economic analysis not only to look at consumer behaviour, but also to assess whether the discipline could offer the regulator insights into how individuals within organisations behaved and responded to regulation.

Details of the papers and the speech are available at the FCA website.