Consumer credit reforms could mean ‘less laws, more FCA rules’
The government’s plans to reform the consumer credit sector could result in more requirements being placed in the Financial Conduct Authority’s (FCA’s) rules and principles, rather than in legislation, it has been suggested.
Speaking at the Credit Summit, the FCA’s director of consumer finance Roma Pearson highlighted the government’s consultation that was published last December, on reforming the consumer credit act.
She said that the City regulator is working with the government throughout the process.
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“This reform process is an opportunity to update and modernise consumer credit regulation, so that it is suitable for the wide array of modern consumer credit products including how firms interact with their customers through digital and technological developments,” she said. “The review also considers the extent to which the legislation can be moved across to our rules, potentially allowing a more coherent, flexible and less fragmented credit regime.
“We also support the government’s objective that the regulatory environment should be flexible enough to facilitate ongoing innovation in the sector as the market evolves. We recognise that if more requirements were placed in our rules and principles, rather than in legislation, this could provide the opportunity for more flexibility in how we respond to new issues as they emerge in the future.”
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The government’s proposals, released on 9 December, aim to cut costs for consumers and businesses, while also increasing equality and fairness in the credit market by improving accessibility.
In addition, it will seek to address concerns around the compatibility of the consumer credit act with the provision of credit for products like electric vehicles or green homes appliances, which did not exist when the Act was first introduced in 1974.
The consultation was released by Chancellor Jeremy Hunt as part of the Edinburgh Reforms, which comprise around 30 reforms to existing financial regulation.
The consultation closed on 17 March and the results are yet to be published.
“We want a well-functioning credit market,” Pearson added. “One where customers are treated fairly and supported if they get into financial difficulty. One where customers get fair value from products and services and are equipped with the information they need to make good decisions. And one where there is opportunity for innovation.”