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The Credit Services Association (CSA)
Feedback on CP15/6 and final rules and guidance
Following their consultation earlier this year into changes to the Handbook (CP15/6), the Financial Conduct Authority (FCA) has now published their Policy Statement for the consultation, setting out their feedback to respondents and confirming the changes that will be implemented.
The Policy Statement details a variety of rule and guidance changes being implemented by the FCA. Below are those most relevant to members of the Credit Services Association.
Continuous Payment Authority (CPA)
One of the key changes is an amendment to the rules surrounding Continuous Payment Authority payments. In February 2015, we notified members of the FCA’s interim position on the use of CPA. This interim position was published due to wording in the CONC CPA rules which indicated that the use of CPA for debt collection would only be possible if it had been covered in the original agreement. The interim position enabled members to continue to use CPA, provided forbearance was demonstrated and firms adhered to all relevant rules. This included giving customers a clear explanation about CPA, as per CONC 4.6.2.
When they published consultation paper CP15/6, the FCA proposed certain amendments to the CPA rules which would make it clear that CPA could be used for debt collection, even if it not had been provided for in the original agreement. In order to do so, firms would need to provide the adequate explanation as detailed under CONC 4.6.2. The consultation paper required that this be provided in a durable medium, such as email or text, and that the customer be given a reasonable period to consider the arrangement. These proposed changes have now been implemented by the FCA and came into force on 28 September 2015.
As such, members that are regulated by the FCA and who agree repayment arrangements using Continuous Payment Authority must now ensure that the customer is given a reasonable period to consider the arrangement and that the customer is provided with the adequate explanation in a durable medium. The FCA has made clear that the customer’s agreement to the arrangement does not also need to be in a durable medium, although members would be advised to retain some record of the customer’s agreement.
The CSA is aware that the immediate implementation of these rules will require changes to members’ procedures and policies, and we will therefore be engaging with the FCA to ensure that they are considerate of the situation.
The new rules can be found in the Handbook under CONC 7.6.2A and 7.6.2B.
The consultation paper proposed that guarantors should be treated as a customer in respect of Principles 6 and 7 of their Principles for Business and the relevant CONC rules. In the Policy Statement, the FCA has acknowledged that this should only apply to those “guarantors who are ‘individuals’ and to agreements under which the borrower is an ‘individual’.” Once implemented on 2 November 2015, this rule will be found under PRIN 3.4 and CONC 7.1. Whilst we expect members would already be treating guarantors in line with the relevant FCA rules, guidance and principles, it is nevertheless worth highlighting the formal change to the rules.
Debt advice availability
In CP15/6, the FCA proposed to amend CONC 7.3.7G in relation to firms referring “a customer in default or arrears difficulty to a source of free and independent debt advice”, by which they mean a source of not-for-profit debt advice. The FCA has clarified in the Policy Statement that this does not prevent firms from also making referral to other FCA-regulated firms with debt counselling permissions in addition to highlighting the availability of free debt advice.
The FCA clarifies in the Policy Statement that “the provision is guidance, not a rule, and is explicitly worded in such a way as to avoid being misread as interfering in the ability of creditors to form appropriate referral relationships”. We would, of course, encourage any members with such referral relationships in place to ensure that those relationships are compliant and consideration has been given to any potential conflicts of interest. The new rules will be found under CONC 7.3, once implemented on 2 November 2015.
These are the primary points of interest for members in the latest Policy Statement. However, we would still encourage members to read the Policy Statement and the relevant rule changes, as there may be some changes unique to particular businesses.