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Who regulates consumer credit?
BIS and the Treasury are reorganising financial services regulation – and are looking to consult the industry on whether the regulation of consumer credit should be moved from the OFT to the new FCA.
The government has made it clear that it favours the move. This would put consumer credit in the same place as retail financial services, once the FCA takes over from the FSA. A new FSA-style rule book would also be put in place.
The alternative is to keep the Consumer Credit Act and leave it open as to who would have control over the regulation.
Government officials have stated that they'll only transfer credit regulation from the OFT if there were benefits. But the consultation does not describe what they see as problems with the current system, which makes any comparison difficult.
Regulatory change is obviously fairly common place. However, this has the potential to have a far-reaching impact on the industry.
The proposals include new capital adequacy requirements, a new authorisation and approved person regime, a new approach to regulation and supervision and many other potentially sensitive issues. The affect these issues would have on businesses is of paramount importance.
Regulatory costs will also be examined. The consultation seems to assume fees will rise – perhaps substantially – to pay for a more proactive supervisory regime. Of course, these additional costs come at a time where finding capital is not easy. If fees do rise, the industry needs to ensure that all regulated companies get value for money.
No one in the industry is under any illusions that these changes will be easy. This consultation is the first step in a long and complex process, which is likely to take years to resolve. We need to work together with the government to produce a better system that benefits lenders and borrowers alike.
Original article, by Fiona Hoyle, courtesy of Credit Today.
