News Review


The consumer credit conduct conundrum by


Robert Sinclair, chief


executive, Association of Mortgage Intermediaries


Te new regime for consumer credit is now reaching a criti- cal phase. With less than six months until the FCA takes responsibility for the provi- sions of the old Consumer Credit Act you might be for- given for thinking that this is a low impact change. Whilst there is still another


two years until the full new regime, the FCA will expect new firms to be complying with their principles from day one in April 2014. Tose who follow regulation closely will know that it is breaches of the principles that get firms into enforcement and fines, not breaking particular rules.


A new dawn I see this as likely to be a de- fining moment


for our new


regulator. It has promised to be different and better than its predecessors but its scope and reach is about to be exploded. Credit comes with some fairly interesting fish living in this


pond. Its first crusade will have to


be pay-day lending, business- es that currently might leave a nasty taste but do broadly act within the law. Te legal battles ahead will


stretch further the FCA’s lim- ited resources. Tese changes will also bring the bridging world closer to a unified ap- proach and again will test the regulators judgment and re- solve. It will be interesting to see


how the politicians and con- sumer lobby try to influence the independent regulator on these issues. Also how second charge


loans are incorporated into the regime has the risk of forcing consideration of a fur- ther advance or re-mortgage in all cases, so strangling this specialist sector. Further, how quickly the


regulator will expect firms to be able to comply with the wider rule book will be one challenge, but how a new unitary consumer credit au- thorisation might operate versus the multi-dimensional approach previously favoured by the OFT be seen.


remains to


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www.mortgageintroducer.com MORTGAGE INTRODUCER SEPTEMBER 2013 7 Tere are more sub-sets in


consumer credit than in the current core investment, pen- sions, mortgage and insur- ance regimes. All of this presents signifi-


cant challenges without liſt- ing the lid on the debt man- agement sector, which many feel might be another area of serious consumer detriment. Does the consumer get value in this area or is their income gobbled up in fees? Te FCA operates under


a new legal mandate where they must protect consumers. A convenient approach might be to apply a stronger compe- tition flavour to their actions as it would be easy to try to drive transparency and dis- closure as a means to promote more competitive markets. In theory this should work and in consumption economics and marketing it tends to. However “financial services” has a clue in the title. It is a barrier, service product set where consumers apply dif- ferent values and judgements that do not lend themselves to this. Service economics and marketing is just differ- ent, subject to totally illogical human decisions.


AMI is looking to get mort-


gage brokers removed from the consumer credit regime unless they are undertaking specific activities. Where they only hold the licence to dis- cuss or consolidate regulated consumer credit this should be covered within MCOB and their mortgage permissions. Tis would simplify the land- scape considerably.


Regulatory regime Finally this will be one of the first times we have moved from a statutory regime to regulatory one. Normally it moves the other way. Credit issues are framed on well test- ed legal precedent. In mov- ing this regime, assurances have been given about some of the important protections to consumers afforded by the current legislation. Tese are complex issues on consider- ation periods, cancellation rights, purchase protection and early redemption protec- tion. AMI and AFB are ready for the discussions. Tere will be much to de-


bate with great complexity in a very compressed time hori- zon, with no flexibility on the completion dates.


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