BIS has published the Government’s response to its consultation on proposals for implementing the CCD. The response includes the Government’s reaction to comments on its draft regulations published in July. Proposals that attracted most comment included the following:

 

  • APR calculations: the response gives detail on what the CCD requires and its approach to making the rules as clear as possible;
  • applying the adequate explanations provisions and the right of withdrawal to business lending agreements and agreements above €75,000: BIS has decided small business lending up to the value of £25,000 should benefit from the same protections as consumer lending;
  • the status of second-charge mortgages (no amendments will affect these, pending outcome of Treasury’s consultation) and charge-cards (which will continue to be covered if their limit is £25,000 or less with higher limit cards falling under the PSR);
  • CCD-driven changes to existing exemptions would apply across the exemption, not just to agreements within that exemption covered by the CCD: on this, BIS says it will not create new exemptions from CCA regulation simply because arrangements fall outside the CCD;
  • credit advertisements: following responses, BIS recognises it will not always be appropriate to assume a set representative amount of credit;
  • pre-contractual information: new Disclosure Regulations will apply to most agreements, but the 2004 Regulations will continue to apply to some. The Distance Marketing Regulations will be amended in line with CCD requirements. BIS recognises it would be appropriate to give creditors the option of how to provide information, whether by using the SECCI or otherwise. BIS has also made more changes to the SECCI;
  • creditworthiness: most respondents disagreed with the plan to apply the requirement to check creditworthiness to all CCA agreements (except pawnbroking and second-charge lending). BIS accepted the comments and will limit the requirement to where the CCD makes it strictly necessary;
  • right of withdrawal: BIS will continue to apply the rights to hire purchase and pawnbroking agreements and has decided not to extend the right of withdrawal beyond €75,000;
  • linked credit agreements: Section 75 CCA will stay, with a new section 75A applying to agreements outside its scope but within the CCD. BIS is aware lenders need to understand which sections will apply to which loans;
  • assignment of rights: some respondents were confused over the meaning of "creditor" in section 189 CCA and BIS has clarified that this means when an assignee purchases debts it also acquires obligations to the debtor including the duty to comply with CCA post-contractual information requirements;
  • overdrafts: BIS will apply the lighter-touch regime of the CCD to all overdrafts, not just bank ones, and will extend the “super-light” pre-contractual information regime to all business overdrafts; and
  • transposition: most respondents were concerned about the implementation timescale and that draft Regulations were not available at the time the consultation was published. BIS is aware firms will face challenges now regulations cannot be laid before Parliament before early March and is exploring ways to manage this