2008 CONSUMER CREDIT DIRECTIVE UK Implementation Valerie Carpenter Consumer and Competition Policy Directorate

2008 Consumer Credit Directive What does it mean for pawnbrokers? Where are we now? What happens next?

Scope Pawnbroking is excluded from the scope of the Directive UK has decided to apply Directive provisions, with some modifications, to pawnbroking Aim is to preserve consistency of credit framework and consumer rights

Key Areas for Pawnbrokers – New Requirements Right of Withdrawal (Article 14) Early Repayment (Article 16)

Key Areas for Pawnbrokers – Changes to Existing Requirements Pre-Contractual Information (Article 5) Contractual Information (Article 10) APR (Article 19)

Right of Withdrawal (Article 14) New across the board 14-day right to withdraw without giving a reason Withdrawal is from credit agreement not purchase agreement Customer repays amount borrowed and interest accruing

Early Settlement (Article 16) New right to partial early repayment of any amount at any time during the agreement (in addition to existing UK full early repayment rights) New creditor entitlement to claim for interest rate compensation where borrowing rate is fixed (where early repayments exceed £8,000)

Pre-Contractual Information (Article 5) Largely in line with existing UK requirements Highly prescriptive - standard information sheet PCI must be provided “in good time” New requirement to supply copy of draft agreement on request Modifications for pawnbrokers?

Adequate Explanations (Article 5.6) Creditor to provide adequate explanations so consumer can assess whether credit agreement is right for him Where appropriate, creditor must explain pre- contractual information, essential characteristics of product and specific effects it might have on the consumer, including the consequences of default Modifications for pawnbrokers?

Contractual Information (Article 10) Requirements largely in line with existing UK legislation but less prescriptive; similar to PCI Information must be clear and concise but no specified order Signature requirement retained Modifications for pawnbrokers?

APR Calculation (Article 19) New formula for calculating APR – but same effect as existing formula Assumptions broadly similar to existing UK assumptions but higher level Committee procedure proposed to resolve gaps in assumptions Most assumptions not relevant for pawn brokers

New Requirements – No Impact on Pawnbrokers Database Access (Article 9) Overdrafts (various Articles) Credit Intermediaries (Article 21) Creditworthiness (Article 8)

Implementing the Directive – Where we are now Formal Consultation closed 10 June Draft implementing regulations circulated late July Discussions with stakeholders during August, comments in early September Working with our lawyers to finalise draft implementing regulations

Implementing the Directive – What happens next Draft implementing regulations to Parliamentary Counsel first half of October Lay implementing regulations by end of 2009 Regulations in force not later than 10 June 2010 Guidance