Reforms will take place, says
Gateley’s Jo Owens, but can they be introduced in
time?
In
December last year, the government published its consultation
document, A New Approach to Financial Regulation,
detailing its reforms for consumer credit.
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After holding consultations with
all the parties concerned, the government concluded there is a
fundamental weakness in the split in responsibility for retail
finance between the Financial Services Authority (FSA) and the
Office of Fair Trading (OFT). It concludes that all consumer credit
should be regulated by the new Financial Conduct Authority
(FCA).
The government proposes to shift
responsibility for regulating consumer credit from the OFT to the
FCA by 2014. It also calls for the simplification of existing
consumer credit legislation, by way of a new consumer credit
rulebook.
It appears to be the industry’s
view that any new rulebook will have to be based on the current
provisions of the Consumer Credit Directive due to the rules
regarding maximum harmonisation. Otherwise it looks as though there
may be opportunity for other provisions of the Consumer Credit Act
1974 to be repealed.
The reforms offer a further
opportunity for industry to lobby for changes to the current rules
regarding voluntary terminations.
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The
right voluntarily to terminate a credit agreement is not expressly
covered by the Consumer Credit Directive and the current provision
of the CCA regarding the right to voluntary termination appears to
go beyond what that directive allows.
There is, of course, scope to lobby
for changes around other provisions which are detrimental to
industry and which are not provided for in the Directive.
While lenders and trade bodies
appear generally supportive of these reforms, there are concerns
about the way the reforms will be implemented.
A big concern is the increased cost
of regulation and the capital requirements provisions of the
current Financial Services and Markets Act 2000 regime.
There are also fears the timetable
for reform is too tight and the government needs to ensure a robust
impact assessment is carried out before any reforms are enacted.
They need to be proportionate and well thought out to ensure the
needs of business and consumers are met.
While it is likely the FCA will
take over the regulation of consumer lending, many doubt such
reforms can take place by 2014.
Jo Owens is a senior associate
at Gateley Solicitors
