Consumer credit policy Ed Smith Head of Banking, Lending and Protection 1

Journey so far FCA took over regulation of consumer credit on 1 April 2014 Over 50,000 regulated firms Large and varied market Different sectors, different profiles 2

Journey so far A new regulator, with flexible rule making powers. We have focused on establishing new rules where risks are highest New rules on high-cost short-term credit The price cap New rules for debt management firms New rules on credit broking Novel uses of data to understand markets 3

Current policy consultation Published on 24 February – CP15/6 We are consulting on: clarifications to ensure our rules and guidance reflect our policy intention, and address new issues which have become apparent since taking over regulation of consumer credit. Deadline for responses 6 May. Policy statement expected in summer 4

Credit broking New rules on credit broking from 2 January Introduced without consultation given evidence of significant consumer harm Explicit process of notice and acknowledgement before a broker can charge a fee Retain records in a durable medium Transparency about the firm’s status We are now consulting on whether to retain or modify the rules We are also proposing minor changes to other CONC rules on credit broking 5

Credit broking We are also using the consultation paper to invite views more generally on broker remuneration In particular, we would welcome views on the following: Pros and cons of remuneration by fee or commission The risks to consumers, and how these can be mitigated Whether enhanced disclosure requirements are needed Whether to ban brokers from charging a fee (i) before an introduction, or (ii) before a credit agreement 6

Guarantor loans A guarantor is typically a family member or friend Currently a guarantor does not have the same protections as the borrower We propose to change that, in four key areas: Extending our main high-level Principles to guarantors Requiring an adequate pre-contract explanation to the guarantor Requiring an assessment of the guarantor’s creditworthiness (as well as the borrower’s) Requiring firms to treat guarantors fairly if they are in financial difficulties and unable to pay 7

Financial promotions We are proposing a number of changes to our financial promotions rules To remove the exemption from the requirement to include a risk warning for high-cost short-term credit To elevate guidance on ‘clear, fair and not misleading’ to a rule To amend the rules on relative prominence so that information is ‘no less prominent’ To clarify the triggers for the representative APR 8

Debt related proposals Using continuous payment authorities (CPAs) as a debt collection mechanism CPA can only be used if it is provided for in the credit agreement We are proposing to allow firms to introduce CPA to collect repayments where a customer is in arrears or default and the lender is exercising forbearance Debt advice in a durable medium Our rules require that debt advice be provided in a durable medium. We are proposing to amend our rules so that debt advice is only required in a durable medium if the firm is likely to enter a contract with the customer 9

Feedback and next steps Consultation period closes 6 May papers/cp15-06-response-form Nick Waugh Financial Conduct Authority 25 The North Colonnade Canary Wharf London E14 5HS We will take feedback into account and publish final rules in the summer. Any questions? 10