Money and Pensions Service reveals plans for a single consumer destination driving financial wellbeing

On 18 March 2021, the Money and Pensions Service (MaPS) published a press release revealing plans to launch a single offering for consumers this summer called MoneyHelper. This will replace the legacy brands of the Money Advice Service, The Pensions Advisory Service and Pension Wise.

MaPS says that MoneyHelper will be a “single destination providing money and pensions guidance over the phone, online and face to face”.

MaPS also says MoneyHelper was developed following extensive user testing amongst MaPS audiences of people who are “struggling, squeezed and cushioned”.

Policy Statement published on changes to FCA Handbook to reflect breathing space

On 26 February 2021, the FCA published Policy Statement 20/1: ‘Breathing Space Regulations – changes to our handbook’ (‘PS 20/1’) to make changes to the Consumer Credit Sourcebook (or ‘CONC’) to implement the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium (England and Wales) Regulations 2020 (which come into force on 4 May 2021).

The changes (which come into force on 4 May 2021) are:

– two new definitions will be introduced: ‘Debt Respite moratorium’ and ‘moratorium debt’;

– CONC 5D.3.3G(5) will be amended to say that if a Debt Respite moratorium is in effect for a customer’s overdraft and a firm is complying with its obligations under that moratorium, the firm is treating the customer with appropriate forbearance for the portion of the overdraft subject to the moratorium (and the firm is not required to take the steps under CONC 5D.3 during the moratorium);

– there will be changes to CONC 6.7 so that complying with a Debt Respite moratorium is considered to be compliance with a firm’s obligations under CONC 6.7 (in effect, a moratorium is equivalent or more favourable steps); and

– firms can take into account the period under a Debt Respite moratorium when considering a ‘reasonable period’ under CONC 7.3.11R.

The FCA does not consider any changes are necessary to CONC 8, or to MCOB.

PS21/1 makes it clear that “consumers ought to be able to benefit from the protections of both the Regulations and our rules” (see paragraph 1.14). The FCA’s view is that “advising a customer on eligibility for a moratorium clearly falls within the regulated activity of debt counselling”.

The FCA also says that any “communications required by our rules should continue to be made. The Regulations do not prevent a credit from contacting a customer where this is required under the Consumer Credit Act 1974 (CCA) or FCA rules (Regulation 11). Section 3.9 of the Insolvency Service’s guidance also explains the effect of the Regulations on communications with customers” (see paragraph 3.5).

The FCA says MCOB does “not require firms to inform customers about breathing space specifically, but a firm may choose to do so” (see paragraph 3.7).

ASA publishes ruling banning advert irresponsibly encouraging the use of credit to finance excessive spending on Christmas gifts

On 10 March 2021, the Advertising Standards Authority published a ruling banning an advert by DSG Retail Limited t/a Currys, PC World, Currys PC World deciding it had irresponsibly encouraged the use of credit to finance excessive spending on Christmas gifts.

The advert referred to a ‘buy now, pay later’ regulated credit agreement provided by Creation Consumer Finance Limited under which the consumer would pay no interest if the balance was repaid in the first six months but, if the consumer decided to pay over the agreement’s term (which was longer than 6 month), interest would be charged for the full period of the agreement (including the first 6 months). The representative APR was 24.9%.

The ASA considered “the combination of the sequence of those scenes and the voice-over statement, “Give everyone you love a little ‘oooh’ this Christmas. Buy now, pay nothing for six months” would lead viewers to understand that the dissatisfied individuals in the first part of the ad had not used or considered a ‘pay later’ method to buy or search for those items, but that the gifts shown in the second part of the ad had been purchased using the ‘pay later’ credit option with Currys PC World“.

The ASA decided that “the ad’s messaging explicitly connected the use of a form of credit with deferred payment to buying more expensive gifts, and making people’s loved ones happy with their presents at Christmas as a result“. The ASA went on to decide that “[p]articularly  in the context of the global pandemic and the associated financial difficulties for many people, we concluded the ad irresponsibly encouraged the use of credit to finance excessive spending on Christmas gifts, and was in breach” of BCAP Code rule 1.2 (responsible advertising).

The ASA ruled the advert “must not appear again in the form complained about” and adverts in the future must not “irresponsibly encourage excessive spending through the use of credit, particularly in relation to purchasing higher value Christmas gifts with a ‘pay later’ payment method“.

High Court finds no unfair relationship arising out of a commercial bridging loan agreement

On 2 March 2021, the High Court handed down judgment in Credit Capital Corporation Limited v Watson [2021] EWHC 466 (QB) where a borrower (who had entered into an exempt bridging loan agreement) alleged his relationship with the lender was unfair under Sections 140A to 140C of the Consumer Credit Act 1974 (the ‘unfair relationship provisions’).

The facts

In essence, the borrower, Mr Watson, had entered into two exempt bridging loan agreements: (a) one for a loan of £1,475,000 with Credit Capital Corporation Limited (‘CCL’) and (b) one for £47,500 with Market Financial Solutions Limited (‘MFS’). Both agreements contained a business use declaration and therefore fell outside of the definition of a regulated credit agreement or a regulated mortgage contract.

The allegations of unfairness

Mr Watson made a number of allegations to say that his relationship arising out of the agreements was unfair under the unfair relationship provisions. The allegations included the following claims:

– a commission was paid to the broker without Mr Watson’s consent;

– rolling up the first year’s interest and deducting it from the advance was unfair;

– pressure was put on Mr Watson and a property was sold because of a false representation over the buyer’s identity; and

– there was a sale at an undervalue for one of the properties.

The Court’s finding on unfairness

Whilst the Court was critical of the evidence put forward by all of the parties, and the lack of evidence from a director of the lenders (particularly where one of the directors was heavily involved), it decided there was no unfairness. The key findings were:

– Mr Watson knew a commission would be paid and there was sufficient disclosure of it;

– there was nothing unfair in rolling up interest for the first year and deducting it from the advance (a common practice in bridging loans);

– whilst pressure was put on Mr Watson, it was not enough to make the relationship unfair;

– whilst there had been a misrepresentation over the identity of the buyer of one of the properties, Mr Watson found out the true position before exchange of contracts so this did not, on its own, make the relationship unfair; and

– there was no clear evidence to show that the properties were sold at an undervalue.

Comment

This is another example of the Court being slow to find unfairness where the borrower is a commercial or business borrower. The Court correctly identified that earlier decisions have not found enforcement unfair unless it has been done in an arbitrary or exploitative way.

The Court also correctly found there was no unfairness where a misrepresentation was made but the true position was discovered before exchange of contracts. It is submitted that this should also be the position in unfair relationship provisions involving consumers. Whilst the unfair relationship provisions do not require an actionable legal wrong to have taken place, it must be the case that there can be no unfairness if the borrower finds out the correct position before entering into the agreement.

Butterworths Financial Regulation Service – updated commentary on CONC and BCOBS, and new commentary on BCOBS 4 and 5, published

Issue 115 of Butterworths Financial Regulation Service has now been published. I’ve written new chapters on BCOBS 4 and BCOBS 5. I’ve also reviewed and revised the existing chapters in BCOBS and in CONC. The commentary is up to date to December 2020.

The changes include:

– revising the commentary in CONC to reflect latest COVID-19 guidance from the FCA;

– updating the commentary in CONC to consider the changes to commission disclosure, including analysing the meaning of the ‘nature’ of commission; and

– considering the changes to both CONC and BCOBS as a result of Brexit.