Stakeholder Notice January 2008
1. This note provides an update on arrangements to implement the Consumer Credit Act 2006 (CCA 06). It relates specifically to consumer credit licensing, OFT information sheets and current consultations on consumer credit legislation.
Consumer Credit licensing from April 2008
2. On 7 January the OFT published revised guidance on fitness and requirements for Consumer Credit licence holders and applicants, as well as a statement of policy on financial penalties for failure to comply with requirements. This guidance and statement of policy can be found on this OFT web page.
3. This revised guidance explains how, from April 2008, the OFT will work with Local Authority Trading Standards Services to check that licensees in high risk business activities have the skills and knowledge needed and relevant business practices in place to carry out the activities covered by the licence to a reasonable standard. Most standard licences will be issued on an indefinite basis, instead of every five years, and the OFT will be able to use improved investigation and information-gathering powers to request information from licensed traders at any time. In certain circumstances, the OFT will also be able to obtain a search warrant to enter premises and seize documents.
4. The guidance also explains how the OFT will identify those applicants that pose greater risks to consumers and how they may be refused a licence or have it revoked, as well as focusing on new entrants and existing operators in sectors of the credit market where consumers may be at increased risk. The OFT plans to use its new powers to impose requirements, for example when the OFT is dissatisfied with the conduct of a licensee or any other matter relating to the licensed business. Failure to comply with the requirements could result in civil financial penalties, and the OFT statement of policy on financial penalties sets out how the OFT intends to use this power.
OFT Information sheets on arrears and default
5. On 16 January the OFT published a general notice on information sheets on arrears and default. Lenders will be required to include a copy of the current information sheet with each relevant notice (arrears or default) from 1 October 2008. These information sheets are intended to provide borrowers and hirers with advice on how to manage their arrears or default. The general notice and information sheets can be found at: www.oft.gov.uk/advice_and_resources/resource_base/legal/cca/CCA2006/.
Consumer Credit legislation: Current consultations
Legislative Reform Order
6. BERR is currently consulting on a draft Legislative Reform Order (LRO) to amend the Consumer Credit Act 1974 to address the unintended consequences of some of the provisions that are due to be introduced by the 2006 Act. The consultation can be found at: www.berr.gov.uk/consultations/page43129.html and the closing date for responses is 12 March 2008.
Consumer Credit Appeals Tribunal Rules
7. The CCA 06 establishes a new tribunal jurisdiction, the Consumer Credit Appeals Tribunal (CCAT). CCA 06 makes provision for how the Tribunal should be constituted for the purpose of hearing an appeal and sets out its powers and procedures. The CCAT will be launched in April 2008 as part of the Tribunals Service. The Tribunal will take on the work of the consumer credit appeals panel which is currently administered by BERR. The Ministry of Justice is currently consulting on the draft Consumer Credit Appeals Tribunals Rules 2008. The consultation can be found at: www.justice.gov.uk/publications/cp2807.htm. The closing date for responses is 27 January 2008.
Section 82(2)
8. HM Treasury and BERR are currently consulting jointly on an amendment to section 82 using powers under the Financial Services and Markets Act 2000 (FSMA) which aims to rule out the possibility of dual regulation of regulated mortgage contracts (RMCs) under both FSMA and the Consumer Credit Act 1974. The consultation is available at:
www.hm-treasury.gov.uk/media/4/5/consult_modifiedcreditagreements211107.pdf
The closing date for responses is 14 February 2008.
9. Lenders have also queried whether s82(2) should continue to apply where a previously unregulated agreement is varied by a later contract which does involve the provision of further credit, but which is itself exempt from regulation under section 16, 16A or 16B of the 1974 Act. BERR are currently considering this request and will shortly enter into discussions with the mortgage industry. We would welcome any views stakeholders may have on the costs and benefits of this suggested change. Please send your comments to CCA.06@berr.gsi.gov.uk by 31 January 2008.
Further information on the Consumer Credit Act 2006
10. Either visit the BERR website or email CCA.06@berr.gsi.gov.uk