Money

UK commits to overhaul of consumer credit legislation


The UK government has committed to reform legislation covering credit cards and personal loans, as the Financial Conduct Authority called on lenders to provide greater support for customers struggling as inflation soars.

The move comes as The Bank of England on Thursday warned that it expected inflation to rise above 11 per cent before the end of the year further fuelling the national cost of living crisis.

The government on Thursday said it expected to outline its proposals to reform the Consumer Credit Act by the end of the year. The measures are expected to cut red tape and enable the FCA to act faster on regulating new forms of credit and simplify technical terms for consumer protection.

However, the government said that the reform was expected to take place over an “extended timeframe” due to the complexity of the regulation.

“The Consumer Credit Act has been in place for almost 50 years — and it needs to be reformed to keep pace with the modern world,” said John Glen, economic secretary to the Treasury.

“We want to create a regulatory regime that fosters innovation but also maintains high levels of consumer protection,” he added.

Alex Marsh, UK head of Swedish payments company Klarna, which became Europe’s most valuable private fintech last June, welcomed the news.

“By reforming the Act, the Treasury has the opportunity make the regulation of consumer credit more focused on enabling competition and better consumer outcomes, not protecting banks,” he said.

Also on Thursday, the FCA wrote letters to more than 3,500 lenders across the UK, including commercial banks and providers of “buy now, pay later” services, a highly popular form of short-term credit.

The regulator wrote that it was vital that lenders treated borrowers fairly and provided an appropriate level of care and support to customers depending on their individual circumstances.

The watchdog found an “inconsistent practice” in measures to ensure vulnerable customers are treated fairly by lenders such as data collection.

Separate research by the FCA, based on more than 400 lenders, revealed that some groups were lacking in areas including encouraging customers to engage with them and investing enough in staff training.

Buy now, pay later, which has grown in popularity during the pandemic, has been criticised by charities and civil society groups that say users sometimes do not understand they are taking on a form of credit, although some providers have taken steps to make this clearer in recent years.

In August, the FCA said it planned to launch a consultation into regulation of the sector after the government review of BNPL was complete.

In February, under the Consumer Rights Act the regulator ordered four buy now, pay later providers to redraft their terms of service which the FCA deemed a risk to consumers.



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.