After many years of making the case for change, we have cautiously welcomed the Government’s announcement of their intention to reform and modernise the now almost fifty-year-old Consumer Credit Act1. We recently published a new report which draws attention to the mismatch between the requirements of the existing legislation and the needs of modern society and business, calling on new Treasury Ministers to prioritise reforms.
While I welcome the Government’s announcement, I also caution the fact that we have been down this road of promises and expectations before. With the Financial Conduct Authority’s ‘Consumer Duty’ now published, it is more important than ever that this dated legislation is finally modernised.
It is important that we move away from the current approach of treating all customers identically and simply grafting antiquated requirements blindly onto new iterations of regulation
Our report entitled, ‘Modernising Consumer Protection: The Case for Reforming and Updating the Consumer Credit Act (CCA)’ recommends the Treasury set out a detailed consultation timetable so that changes are introduced before the end of 2023 to avoid undermining the Financial Conduct Authority’s (FCA’s) obligation to introduce a Consumer Duty. We will be discussing this with the FCA at our upcoming online Consumer Duty workshop on 6 October (https://www.csa-uk.com/events/EventDetails.aspx?id=1673480&group=).
The report also recommends reform of consumer credit communications and suggests that the review looks strategically at the genuine needs of modern consumers. It is important that we move away from the current approach of treating all customers identically and simply grafting antiquated requirements blindly onto new iterations of regulation.
It has been widely recognised for many years now that some post-contractual information requirements never provided the information or accuracy that consumers actually need, while at the same time managing to undermine businesses’ attempts to work with their customers. Slapping a bandage on already faulty requirements by suggesting yet more paperwork to explain failing regulations isn’t going to cut it, if we are serious about the Consumer Duty.
The report also draws out the importance of policymakers recognising the environmental impacts of their demands. The current approach to regulation demands vast quantities of paper to be posted to borrowers, and often even when circumstances such as the exercise of forbearance makes the mandated information factually inaccurate. The report suggests that some of the existing statutory notices could easily result in producing a carbon footprint of at least 1.3 million kg, consume 1680 trees and using 420 thousand kWh of energy – just to provide inaccurate but compulsory information!
We are therefore recommending the new Treasury Ministers to pick up the baton of their predecessors and set out a timetable now to fulfil the legislative reform commitment. Comprehensible and joined-up consumer regulation demands nothing less.
The full report can be downloaded from the CSA website here.