Industry News

Government reviews Consumer Credit rules 27/07/10

The government has announced that it is reviewing the rules that govern consumer credit agreements and personal insolvency. It will look at the way credit cards, loans and other products are sold and the extent to which consumers understand what they are committing to.

Consumer Affairs minister Edward Davey also said the review will look at issues that arise during the life of a loan from both the perspective of the consumer and lender and whether personal insolvency solutions are currently fit for purpose for people who have not kept up to date with their debts. The aim is to ensure people get a fair deal on lending products, improving access for those currently financially excluded and ensuring a fair insolvency regime and regulatory framework.

They will look for stakeholders to give feedback on what is working well and where they would like the government to intervene and the review will lead to a full consultation later this year or early 2011.

OFT consults on debt collection 01/06/10

The OFT has started to draft new guidance on debt collection, specifically focusing on data accuracy. There have been reports that some people are being chased for debts based on wrong information that has been passed from the creditors to debt collection agencies. It will also look to address issues in the tracing process where messages have been passed through neighbours and the debt sale and purchase process. The OFT has been liasing with the CSA on this guidance and is expected to publish its draft guidance shortly for consultation, with the final proposals published in the Autumn.

Ministry of Justice looking at enforcement reform 01/06/10

The MoJ is looking to introduce a tiered fee structure for enforcement agents as part of its reform of the Tribunal Courts and Enforcements Act. This would mean that the cost would be weighted depending which type of activity was undertaken eg whether the action took place over the phone or on the doorstep. The cost would still be the responsibility of the debtor.

The MoJ has been in consultation with the industry on these proposed reforms although they are waiting for Ministers to comment on enforcement after the new coalition government coming into power.

CCCS releases debt figures 04/05/10

The Consumer Credit Counselling Service (CCCS) has published figures showing that 93,000 people contacted the CCCS for help with debt in the first quarter of 2010, which is an increase of 23,568 in calls made compared to the same period last year. The CCCS believe this number will continue to grow in 2010. UK Consumer debt as it currently stands is at £1.5trn with around 11% of the population struggling to manage debts.

OFT guidance on irresponsible lending 20/04/10

The OFT has published guidance on the irresponsible lending element of the test of fitness to hold a credit licence.

Aimed at providing clarity for businesses and consumers about behaviour the OFT considers may constitute irresponsible lending practices under the Consumer Credit Act, it covers each stage of the lending process, from the pre-contract stage of advertising credit through to the handling of arrears and default on agreements.

The OFT expects creditors to have regard to the guidance so that they can avoid engaging in irresponsible lending practices. For example, it makes clear that creditors should:

not use misleading or oppressive behaviour when advertising, selling, or seeking to enforce a credit agreement
make a reasonable assessment of whether a borrower can afford to make repayments in a sustainable manner
explain the key features of the credit agreement in order to empower the borrower to be able to make an informed choice
monitor the borrower's repayment record during the course of the agreement, offering assistance where borrowers appear to be experiencing difficulty
treat borrowers fairly and with forbearance if they experience difficulties

Industry body defends right to consult on edited Electoral Register 22/03/10

The CSA has responded to the MoJ's consultation on the edited Electoral Register, used to trace "gone aways", claiming consumers could be negatively impacted. A proposed change suggests that a DCA's right to consult the register should be removed. But rather than protecting consumers, the CSA believes it will have the opposite effect and that consumers may become victims of a "mis trace." In its formal response, the CSA stated the abolition would play straight into the hands of the "won't pays" - making it easier for those who have "forgotten" they have a moral obligation to repay the debt. The CSA believes that the collections industry cannot agree to the abolition of the edited electoral roll and that the only way to reduce the number of mis trace cases is to give the industry access to the full electoral register. The consultation closed on Feb 23rd and a response is due to be published by 18 May 10.

New Free Money advice service 17/03/10

The Government has launched a new free money advice service. Delivered through partners such as Citizens Advice Bureau and Age Concern, the service includes a helpline, website and face to face advice services with independent experts. People can get free advice on money worries, financial planning and their consumer rights if they think they're not getting a good deal. The service was originally piloted in the North East and North West and after its success is now available nationwide.

The Government will consult on these proposed changes shortly.

Changes to the way customers repay credit card debts. 15/03/10

Changes to the way customers repay credit card debts.

The Government has today announced plans to change the way credit card companies make customers repay their debts. The agreement with the card companies means;

the most expensive debt will get paid off more quickly (payments will go to those debts with the highest interest rate first)
a ban on credit limit and rate increases for customers at risk of financial difficulty
a better repayment plan for new customers
a right to 60 days to reject interest rate increases

The Government estimates that this will save consumers around £300 million a year.

DRO eligibility criteria proposed changes 03/03/10

The Government has announced plans to change the eligibility criteria for a DRO (Debt Relief Order) so that people with small pension pots can apply for this low cost debt solution. Insolvency practitioners have complained that the current eligibility criteria excludes those individuals who have built up a small pension of over £300. A recent CAB survey showed 96% of people were excluded because of their pension and of those 78% had a pension pot of under £5k. DRO's were introduced as a low cost alternative to bankruptcy aimed at those with debts less than £15k, assets of less than £300 (up to £1k if they owned a car) and less than £50 surplus income a month.

The Government will consult on these proposed changes shortly.

OFT publishes section 77-79 guidance 01/02/10

The OFT has disagreed with the courts on the issue in its draft guidance for the industry on sections 77-79 of the Consumer Credit Act 1974. These sections allow consumers to request information about their credit agreements. They said that;

lenders and collectors must not threaten legal action if they've failed to fulfil debtor requests for information plus
creditors and debt buyers must notify debtors that they're not allowed to enforce

The review was prompted by the OFT because of concerns that debtors were getting confused and misled into thinking that the sections could be used as a loophole to get their debts written off. The sections do allow a consumer to request a true copy of their agreement but the OFT agrees with the High Court in that it doesn't need to a photocopy or exact copy of the original. If the creditor fails to provide the info, the debt is unenforceable however the OFT state that this doesn't mean the debt is written off. Lenders can then pass the account to a 3rd party to collect and inform the credit reference agencies of the arrears.

The guidance from the OFT is to clarify the legal position and their view on standards expected of the industry. Also to make consumers aware that they may be at risk should they look to use these sections to avoid paying legitimately owed debts.

Delay in Enforcement fees consultation 25/01/10

The Ministry of Justice's consultation on enforcement fees is now not expected to be out until after the general election. There are two parts to the document, the fees element is thought to be completed but the draft regulations on the taking control of goods need further consideration. Although this affects the start of the consultation process it is still the intention to publicly consult in 2010 and implement the changes in April 2012.

Government retreat on Statute of Limitations 08/12/09

The Government recently backed down on proposed changes to the Civil Law Reform Bill much to the relief of the credit industry.

The draft bill had proposed reforms to reduce the period in which civil debts can be collected from 6 years to 3 years. This could have seen businesses forced to write off millions of pounds of debt. The ICM believes that the strong lobbying of those in the credit industry has greatly influenced this decision.

Civil Procedure Rules - 49th update 03/08/09

Effective from April 6th 2009, a new practice direction on pre action conduct has been introduced with the aim of enabling parties to exchange information in order to try and settle an issue without the need to start court action. Please read on for more detail and the changes required in response to the new direction.

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