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Background

• enhancing consumer rights and redress by empowering consumers to challenge unfair lending, and through more effective options for resolving disputes;

• improving the regulation of consumer credit businesses by streamlining the licensing system, requiring minimum standards of information provision to consumers and through targeted action to drive out rogues; and

• making regulation more appropriate for different types of transaction by extending protections to all consumer credit and by creating a more proportionate regime for business.

Commencement Orders

These can be viewed via the Key Documents page.

Statutory Instruments (SIs) covering: exemptions; post-contract transparency and licensing.

The SIs were made on 31st March 2007. (A further amending SI was made on 2 July 2008 which corrects and clarifies some of the post-contract transparency provisions in the principal post-contract transparency and licensing regulations.) They give full effect to a number of sections of the 2006 Act. These fall into three categories:

• Exemptions from regulation – sections 3 and 4 of the 2006 Act. The Order specifies: the conditions under which an agreement made with an individual of ‘high net worth’ may be exempted from regulation; and the form and content of the required statement of high net worth in relation to and the declaration by the individual. The Order also sets out the form and content of declarations by debtors or hirers where an agreement is wholly or predominantly for business purposes and the amount of credit provided under the agreement exceeds £25,000.

• Post-contract information – Regulations relating to sections 6, 7, 9, 10, 12, 14 and 17 of the 2006 Act. These Regulations specify precisely what information must be included in statements and notices given to consumers by creditors and owners. The objective has been to balance the need to ensure that consumers are provided with relevant and clear information about the state of their credit account as set out in the 2006 Act, with the need to ensure that any burden on industry is not disproportionate.

• Licensing issues - Regulations relating to sections 34 and 35 of the 2006 Act. These set out the maximum duration of a time-limited licence, and the periods for the payment of charges for indefinite licences.

Draft Legislative Reform (Consumer Credit) Order 2008

The draft Legislative Reform Order (LRO) was laid in Parliament on 17 June and has been approved by the House of Commons. It will be debated in the House of Lords on 8 October. Subject to final approval in the Lords we plan to make the LRO so that it can enter into force on 31 October 2008.

The LRO proposes an exemption for buy-to-let lending, clarifies the position for the giving of statements for fixed-sum credit agreements and provides definitions of "payments" for the purpose of issuing notices of sums in arrears.

The draft Order and the accompanying Explanatory Document can be found on the right.

Transitional provision for buy-to-let lending

A transitional provision was included in the 4th Commencement Order to prevent section 2 of Act applying to agreements which meet the new criteria for buy-to-let lending as set out in the LRO. At the time we made the Commencement Order we expected the LRO to come into force on 1 October and so the transitional was made to apply until then. In view of the delay in making the LRO, we have extended the application of the transitional provision in the Commencement Order to 31 October, by making an amending Statutory Instrument.
The SI amending the 4th Commencement Order was made on 15 September and can be viewed at: www.opsi.gov.uk/si/si2008/uksi_20082444_en_1.

OFT guidance on use of civil penalties, and fitness and requirements

On 7 January 2008 the OFT published its Statement of Policy on Civil Penalties (which was approved by the BERR Secretary of State) and its guidance on fitness and requirements.