On February 19, 2016 the FCA published proposed guidance on enforcing security under the Consumer Credit Act and when a default notice is required to be issued. The guidance is aimed at firms that provide consumer credit services and products. The proposed guidance invites comment on “what is enforcement” in the context of when a firm could breach the CCA. The proposed guidance relates to the requirement under the CCA to serve a default notice, following the breach of a regulated agreement, before taking certain enforcement actions. In a previous feedback statement published in September 2015, the FCA stated that a default notice was not required when taking or demanding payment from guarantors following a default because this was deemed to be enforcement of a security. This guidance provides the updated view that this statement made in the feedback statement was incorrect. The guidance provides specific circumstances where a default notice would be required in the context of guarantor loans. One such circumstance is where a creditor wishes to request or take payment from a guarantor following non-payment by a debtor. The FCA has taken the view that a creditor cannot take payment from the guarantor where it has failed to serve a valid default notice. Comments on the consultation may be submitted until March 18, 2016.

The Proposed Guidance is available at: http://www.fca.org.uk/static/documents/gc16-02.pdf