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The Treasury has been urged to set out a detailed consultation timetable for its planned reforms to consumer credit regulation, to avoid undermining the introduction of its new consumer duty later this year.
The government body announced its plans earlier this month to reform the Consumer Credit Act, which will cut costs for businesses and simplify rules for consumers. The reforms will allow lenders to provide a wider range of finance and to provide credit more easily for new technologies such as electric cars.
The Credit Services Association (CSA), the UK trade body for the debt collection and debt purchase industry, has cautiously welcomed the government’s plan.
However, it has recommended that the Treasury set out a detailed consultation timetable so that changes are introduced before the end of 2023, to avoid undermining the Financial Conduct Authority’s (FCA’s) obligation to introduce a consumer duty.
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Chris Leslie, chief executive of the CSA, warned that “we have been down this road of promises and expectations before”.
“With the roll out of the FCA’s consumer duty imminent, it is more important than ever that this dated legislation is finally modernised,” he added. “We would urge the future Treasury team to recognise the importance of aligning with this.”
The City watchdog has proposed a new consumer duty for all regulated firms, including peer-to-peer lending platforms, stating that “a firm must act to deliver good outcomes for retail clients.”
Firms will be required to test and show that their communications are clear and that consumers are receiving good outcomes.
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Regulated firms already have a responsibility to treat customers fairly but the FCA wants to make this more explicit.
Last year, the regulator said that the new consumer duty would take effect on 31 July 2022, but it is unconfirmed whether it will meet this deadline.
“It is important that we move away from the current approach of treating all customers identically and simply grafting antiquated requirements blindly onto new iterations of regulation,” said report author Henry Aitchison, head of policy at the CSA.
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“It has been widely recognised for many years now that some post-contractual information requirements never provided the information or accuracy that consumers actually need, while at the same time managing to undermine businesses’ attempts to work with their customers. Slapping a bandage on already faulty requirements by suggesting yet more paperwork to explain failing regulations isn’t going to cut it, if we are serious about the consumer duty.”
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