Policy

Making consumer credit markets fairer

Supporting detail:

Consumer credit regulation

Transfer of Consumer Credit Regulation

On 6 March 2013 the government announced its decision to transfer regulation of consumer credit from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA).

The changes will mean consumer credit and other retail financial services are now regulated by the same body: the FCA. This should provide a more consistent approach to consumer protection. The government has tried hard to get the balance right between ensuring consumer protection and proportionate burdens on firms. The FCA will have tough, responsive powers to tackle emerging problems in credit markets quickly and effectively from April 2014.

On 27 June 2013 we published our response to the consultation on Transferring Consumer Credit Regulation to the FCA. It highlights policy and legislative adjustments we’ve made to take respondents’ views into account.

Consumer credit licence suspension

The government has given the OFT the power to suspend a consumer credit licence without notice, if necessary. Businesses that sell on credit, lend money or provide debt collecting services to consumers need to have a credit licence.

The OFT will be able to use this power if it thinks there is a financial services company whose activities are causing serious trouble for consumers.

The OFT will be able to suspend a credit licence anywhere in the UK consumer credit market. This new power means the OFT remains an effective regulator in the run up to handover of credit regulation to the FCA in 2014.

Annual percentage rates (APRs) EU directive 2011/90/EU

The government has implemented new EU rules on how lenders calculate Annual Percentage Rates (APRs).

An APR tells consumers how much interest they will pay on a loan or other credit product over a year.

The directive meant that some APRs are now calculated differently for certain credit products.

All lenders in the EU now apply the same set of calculation assumptions when advertising the costs of credit products.

This means consumers can be more confident when they’re comparing similar credit products.

For more information and guidance, consumer credit businesses should see Guidelines on the application of Directive 2008/48/EC (Consumer Credit Directive) in relation to costs and the Annual Percentage Rate of Charge

We’ve also updated chapter 5 of our guidance to the UK credit industry to reflect the new regulations.

The new regulations came into force on 1 January 2013.

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