Overview

The Consumer Credit (Regulation and Advice) Bill aims to better protect consumers from unfair credit practices by limiting interest rates and charges, establishing a debt advice service, and granting local authorities more power over the location of credit agencies. It also seeks to improve access to credit union services through Post Offices.

Description

This bill introduces several key measures:

• Interest Rate Caps: The Office of Fair Trading (OFT) will be given the power to set limits on the total cost of credit, considering factors like market competition and consumer detriment. These limits would be published and regularly reviewed.
• Linked Transaction Limits: The OFT can also set limits on the costs of transactions linked to credit agreements (e.g., insurance or collection services) if they are found to be used to circumvent the main credit limits or cause consumer harm.
• Fines for Non-Compliance: Lenders exceeding the set limits face fines up to 10% of their annual turnover. These fines can be appealed to the Secretary of State.
• Financial Ombudsman Service Role: The Financial Ombudsman Service will take these limits into account when assessing the fairness of credit costs. They must also publish annual details of consumer credit decisions involving unfair costs.
• Debt Commissioner: A new Debt Commissioner will be established, funded by a levy on credit and debit card providers, to oversee the provision of debt advice services.
• Local Authority Powers: Local authorities will get the power to restrict the location of consumer credit agencies in their areas.
• Post Office Credit Unions: The bill mandates regulations to allow credit union services to be accessed via the Post Office network.

Government Spending

The bill will lead to increased government spending to fund the Debt Commissioner and debt advice services. The exact amount is not specified in the bill, but funding will be collected through a levy on credit and debit card providers and the operational costs of the Debt Commissioner are capped at 1% of the total funds provided.

Groups Affected

• Consumers: Potentially benefit from lower credit costs and increased access to debt advice.
• Credit Lenders: May face lower profits due to interest rate caps and fines for non-compliance.
• Credit and Debit Card Providers: Will be subject to a levy to fund the Debt Commissioner and debt advice services.
• Local Authorities: Gain greater control over the location of consumer credit agencies within their jurisdictions.
• Credit Unions: Could benefit from increased access to customers via the Post Office network.
• Debt Advice Services: Will receive funding to expand their services.
• OFT and Financial Ombudsman Service: Increased responsibilities in regulating and overseeing consumer credit.

Powered by nyModel