Overview

The High Cost Credit Bill aims to protect consumers from exploitative high-cost credit agreements by giving the Financial Conduct Authority (FCA) greater powers to regulate the sector. This includes defining what constitutes "high-cost credit," setting penalties for non-compliance, and potentially capping the total cost of such agreements.

Description

This bill grants the FCA the power to define and regulate high-cost credit agreements. It will create rules to prohibit specific features in these agreements (detailed in Schedule 1), such as unaffordable loan amounts, excessive default charges, and problematic "rollover" lending. Schedule 1 also covers restrictions on the use of continuous payment authorities and the involvement of guarantors. The FCA will also set out required behaviours for lenders (detailed in Schedule 2), including advertising restrictions, data reporting to a new regulatory database, and mandatory referral to debt advice services in certain situations. The bill also empowers the FCA to levy a charge on the high-cost credit sector to fund additional debt advice services and to consider imposing a cap on the total cost of high-cost credit agreements. The FCA will need to implement rules within three months and a new regulatory database within twelve months of the bill passing.

Government Spending

The bill doesn't specify exact figures for government spending. However, it allows for a levy on the high-cost credit sector to fund additional debt advice services. The amount of this levy will be determined by the FCA, considering the number of consumers referred to debt advice and other relevant factors.

Groups Affected

• High-cost credit lenders: These lenders will face greater regulatory scrutiny, potential penalties for non-compliance, and may be required to pay a levy to fund debt advice. They will also be required to adhere to stricter advertising guidelines and data reporting requirements.
• Borrowers: Borrowers will benefit from greater protection against exploitative lending practices, potentially resulting in fairer loan terms, reduced default charges, and increased access to debt advice.
• Debt advice services: These services may receive increased funding to help consumers struggling with high-cost debt.
• Credit brokers: Credit brokers will be required to provide borrowers with details of the lenders they are working with.

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