In last week’s debates on the Financial Services Bill amendments have been introduced which have clarified the Government’s approach in relation to the prospective transfer of the Consumer Credit Act regime to the FCA.

The good news is that the Government has now recognised the complexity of the process and that the detailed protections and rights granted to consumers under the Consumer Credit Act cannot simply be replicated in a rule book operated by the FCA. They have recognised that a hybrid approach will have to be adopted whereby elements of the Consumer Credit Act are retained, albeit under the regulatory control of the FCA, whilst other elements can be converted into a set of more flexible rules for ongoing management and development by the FCA.

A key point to note is that the Government has stressed that the net result will not only be more flexible but also a more draconian regulatory regime in the sense that the FCA will be able to bar specific products or product types or features from the market, impose unlimited fines for breaches of its rules and also order entities to undertake consumer redress actions for breach of the rules. There was even a suggestion that these powers may allow the FCA to control interest rates. This clearly creates a far more dynamic and vigorous supervisory environment.

The question of how licensing should operate once the FCA adopts the regulatory role for consumer credit is not fully addressed and remains an open question.

The Government stated that its intention is to consult on how all these measures should best be implemented through regulations in 2013 with a view to transferring the regulatory responsibility and establishing a new framework within the FCA in 2014.  This timescale still seems somewhat ambitious but at least the Government has recognised the complexity of the issues raised.  

If you wish to see the new clause 4 in the Bill covering these powers please use the following link:

http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120423/debtext/120423-0002.htm#1204234000002