U.K. FCA Proposes Consumer Credit Regulatory Regime, New Payday Lending Rules

Payday Lending UK Regulatory Reform UK OFT UK FCA

On October 3, the U.K. Financial Conduct Authority (FCA) proposed a framework for its regulation of consumer credit when those authorities transfer to the FCA from the Office of Fair Trading on April 1, 2014. As part of the U.K.’s ongoing regulatory reform and restructuring, after that date the FCA will supervise more than 50,000 firms who have existing credit licenses. The FCA proposes, among other things, (i) requiring lenders to conduct affordability checks on borrowers, (ii) requiring clear, fair and not misleading advertisements, and (iii) banning misleading advertisements. The regime would include additional new rules for payday lenders, which would: (i) restrict loan roll-overs to a maximum of two, (ii) require lenders to provide borrowers who roll-over loans with information about debt advice resources, (iii) restrict to two the number of times an automatic payment deduction authority can be used, and (iv) restrict the content of payday lending advertisements. The Consultation Paper is open for comment through December 3, 2013. The FCA plans to publish the final rules and guidance in February 2014.