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Consumer credit market consultation announced

The Financial Conduct Authority (“FCA”) has published proposed rules for consultation for the consumer credit market ahead of its take over of the regulation of the consumer credit industry from the Office of Fair Trading on 1 April 2014


The FCA has used the consultation paper to “put the spotlight on payday and other high-cost short-term lending”.

In the paper (deadline for responses is 3rd December 2013), the FCA underlines its aim to make those practices that pose a higher risk to consumers subject to stricter controls. This also explains the intention to apply stringent rules for the high-cost short-term credit sector (payday loans).

Of specific relevance to advertising: Content (all advertising)

• Any financial promotion needs to be clear, fair and not misleading

• One difference to the current rules concerns statements about speed of granting credit which are now considered an “incentive”. This will trigger the requirement to include APRs in ads

• On APRs, the FCA has decided not to make changes in the way prices are displayed in ads. This is informed by BIS research which indicates “price information may not be the most effective way to better inform consumers” and by restrictions placed on the FCA by EU law Content (payday loan advertising)

• All high-cost short-term credit (mainly defined by an APR of or exceeding 100%) will have to carry the following risk warning irrespective of whether they trigger APR requirements: “Think! Is this loan right for you? Over 2 million short-term loans were not paid off on time in 2011/12. This can lead to serious money problems.

If you’re struggling, go to for free and impartial help.”

Other points of note

• The FCA’s sanctioning powers will include: amendment & withdrawal, requiring formal statements to show that effective governance is in place, ad ban (in cases of non-cooperation) and enforcement action (worst case scenario)

• The new rules for financial promotions will come into effect for all electronic communications on 1 April 2014 and for all other adverts on 1 July 2014

Says IPA Legal Director Richard Lindsay; “Payday loans have been in the spotlight recently and this consultation paper presents a good opportunity for the FCA to demonstrate its commitment to protecting vulnerable consumers who might not appreciate the costs of loans they take on.”

Last updated 09/10/2013

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