Last week the government committed to reform the Consumer Credit Act 1974 which regulates credit card debt, personal loans and secured lending.
The government has agreed to modernise the act which will hopefully cut costs for lenders and simplify some very overly complicated rules for consumers. It is expected that a consultation will commence by the end of the year.
This news is welcomed by the consumer credit industry who recognise that we need more flexible and less cumbersome regulation. The government will remove much of the Act, which has been in place for over 50 years, from statute to sit under the FCA. This will mean the FCA can be more agile in responding to issues in the consumer credit market and will avoid the need for them to amend legislation.
The issues with the Consumer Credit Act were never starker than during Covid when Lenders were required to provide forbearance in the form of repayment deferrals for up to 3 months at a time. Despite there being an agreed form of forbearance in the form of a deferral, in many cases (unless the lender formally modified the Agreement) the Lender was still required to send out formal statutory notices to the Customer suggesting the customer was in arrears.
These notices are prescriptive in nature, are not user friendly, and therefore, do not allow for a good customer outcome. In many cases, Lenders must send covering letters attempting to explain the position.Any change to this process is to be welcomed. I would urge all lenders to engage with trade bodies to feed back once the consultation has started.
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Mel is the Director of Client Experience and Culture for Equivo. Mel is passionate about listening to our clients and developing products and services to support them. Mel will help to ensure Equivo is the best of the best in terms of its offering to clients, she recognises that our people and culture are of critical importance to deliver these outcomes. Mel is an expert in asset and motor finance recoveries.
