Reform of consumer credit and mortgage regulation
Consumer credit regulation transferred from the Office of Fair Trading to the Financial Conduct Authority (FCA) on 1 April 2014, trebling the number of firms the FCA supervises.
Having previously been subject to the Consumer Credit Act as enforced by the Office of Fair Trading, some 35,000 UK credit providers now face a regulatory framework which combines provisions retained from the Consumer Credit Act with rules contained in a new Consumer Credit Sourcebook (CONC). Credit firms are also now subject to the broader framework of FCA requirements including its Principles for Businesses (PRIN) and Systems and Controls (SYSC).
Between April 2014 and April 2016, the FCA operated an Interim Permission regime, allowing firms to continue doing business while they applied for FCA authorisation or Limited Permission Authorisation – the latter category generally applying to those firms which provide credit on an ancillary basis, for example motor dealers and high street retailers. All firms providing consumer credit products were required to apply for Full Authorisation, unless they chose to become Appointed Representatives of a regulated firm.
The CONC rules came into effect on 1 April 2014. The FCA will review the remaining provisions of the Consumer Credit Act by 2019, identifying where these might also be incorporated into CONC or reflected elsewhere in the Handbook. The consumer credit industry will therefore face continuing change over the next few years.
Lenders providing second charge mortgages also became regulated by the FCA with effect from April 2014. They are also required to comply with the EU Mortgage Credit Directive (MCD) which came into effect in the UK on 21 March 2016. During 2014 and 2015, the FCA consulted on new rules aimed at implementing the Directive and for regulating secured lending more generally. CP 15/6, which was published in February 2015, consulted on the changes that would be required to CONC in order to implement the MCD (FLA email of 24 February 2015 refers). Feedback was published in Policy Statement 15/20, which was published on 31 July 2015 (FLA email of 4 August 2015 refers). Second charge mortgages are now regulated on the same basis as first charge mortgages under the FCA’s Mortgage Conduct of Business Rules (MCOB).