Legal issues for the UK consumer finance industry
We’ve recently updated a practice note, published by Practical Law and written by Russell Kelsall and Alanna Tregear, entitled: ‘What is the meaning of credit under the UK consumer credit regime?’. We’ve updated it to consider the High Court’s recent decision in CFL Finance Limited v Bass & Others [2019] EWHC 1839 (Ch).
If you’re a subscriber to Practical Law, you can visit the practice note by clicking here or by visiting: https://uk.practicallaw.thomsonreuters.com/w-005-5092.
On 29 March 2019, the Treasury made the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019.
From ‘exit day’, these Regulations will effectively mean the rules in Rome I, Rome II and the Rome Convention will continue to apply as domestic law in all parts of the UK to decide the applicable law for contractual and non-contractual obligations.
On 25 March 2019, the Treasury made the Payment Accounts (Amendment) (EU Exit) Regulations 2019. This will make a number of amendments to (amongst other things) the Payment Accounts Regulations 2015.
The Regulations come into effect on ‘exit day’.
On 25 March 2019, the UK Financial Conduct Authority (the FCA) published a press release and its policy paper on its long-awaited ‘Review of retained provisions of the Consumer Credit Act 1974’ (the Paper). The Paper has been presented to the Government and follows on from the FCA’s interim report (published in August 2018).
The devil is, of course, always in the detail (particularly where consumer credit is concerned). However, and somewhat frustratingly, it appears the FCA’s views in the Paper broadly follows its views set out in the interim report.
For example, the FCA says certain ‘rights and protections’ need to be maintain in legislation (but some rights and protections could be transferred to the FCA’s handbook) (see Chapter 5). But it seems the awfully complex modifying agreement provisions in Section 82 of the Consumer Credit Act 1974 (the CCA), which have long-since passed their sell-by date and often cause lenders headaches when they want to do ‘the right thing’, will remain (see para 5.23).
Similarly, the FCA says the information requirements provide an “appropriate degree” of consumer protection and should be kept. But the impact of the sanctions, and some of the information, needs further consideration (see Chapters 6 and 7).
But what the Report overlooks is the fact that the current regime is complicated for both consumers and lenders (and the sanctions are more serious than those which apply to a mortgage lender). Even a very experienced Court of Appeal, in McGinn v Grangewood Securities Limited [2002] EWCA Civ 522, said (in para 1) that the appeal in that case raised “a number of issues under the [CCA] which has recently provided so much work for the courts. Like others, this case demonstrates the unsatisfactory state of the law at present. Simplification of a part of the law which is intended to protect consumers is surely long overdue so as to make it comprehensible to layman and lawyer alike. At present it is certainly not comprehensible to the former and is scarcely comprehensible to the latter“. Since that decision, we have had further significant changes in 2005, 2007/2008, 2011 and 2014 (none of which have made the regime any easier to understand). No doubt the Court of Appeal will have more to say on this in the future.
On 21 March 2019, the FCA’s Executive Director of Supervision – Retail and Authorisations, Jonathan Davidson, gave a speech on what the consumer credit sector can expect from the FCA.
There are some key messages including:
– There has been a lot of change in the sector.
– The FCA will continue to focus on affordability, business models and culture.
– Brexit will not change the way the sector is regulated.
– The FCA’s focus in the high-cost sector is on (a) re-lending and (b) affordability (particularly on guarantor lending).
– The Senior Manager & Ceritifcation Regime will help improve culture.
The speech ends by saying: “My top top for today is to keep ahead of the rules, you can invest in expensive tick box compliance or you can get on top of your culture., A healthy purposeful culture will be the best way to deliver value for you, your clients and your business”.