FCA takes over consumer credit regulation
By Marianne Curphey
Consumer credit issues are set to come under the watchful eye of the year-old Financial Conduct Authority (FCA). The body is expected to bring closer scrutiny to issues that have riled consumers and their advocates.
The FCA has already been regulating financial services for nearly a year, after taking over those duties from the Financial Services Authority (FSA) in April 2013. On April 1 of this year, the FCA will take on the activities of the Office of Fair Trading (OFT), which will be shuttered. Those activities include the regulation of hire purchase, credit card issuers, payday loan companies, pawnbrokers, debt management and collection firms, and providers of debt advice.
Martin Wheatley, head of the FCA, says he wants a new approach to regulating consumer credit, ensuring that irresponsible firms and bad practice will have no place in the consumer credit marketplace.
The FCA has a handbook of rules that other financial services firms must follow, and it will bring consumer credit firms into that same regulatory system. For example, the FCA is proposing to apply tighter rules to make sure payday lenders treat their customers fairly.
"The restrictions must be more than just an interest rate cap, as for many people it's the hidden costs -- fees and rollover charges -- that make borrowing from a payday lender so punitively expensive, but also a debt trap from which it is hard to escape," says Mohsin Mehdi, CEO of national, non-profit credit union My Community Bank.
interests are top priority
Richard Lloyd, executive director of the Consumers' Association's Which?, said it was important that government put consumers at the heart of policymaking.
"Which? already works with the competition authorities, and we would welcome a closer relationship [with the FCA] to help set clear priorities for competition, consumer protection and market reform," he says.
Other issues that the new regulator plans to tackle are:
- Affordability checks for every credit agreement so consumers can actually afford the loan they are being offered;
- Clear and fair advertisements;
- Tough supervision of firms that do higher risk business (such as payday lenders);
- Making sure borrowers rolling over a loan have information on where to get free debt advice;
- The continuation of the Financial Ombudsman Service (FOS) for complaints by consumers against financial services companies.
The FCA will also oversee the way that businesses are treating customers. To ensure that consumer fairness takes a central role for businesses, the FCA says it will:
- Bring more enforcement cases and press for tough penalties for infringements to reset conduct standards;
- Pursue more cases against individuals and hold members of senior management accountable for their actions;
- Pursue criminal prosecutions, including insider dealing and market manipulation;
- Take action to tackle unauthorised business;
Continue to prioritise getting compensation for consumers.
Published: 20 February 2014
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