Overview

The Consumer Credit (Regulation and Advice) Bill aims to better protect consumers from exploitative credit practices by capping interest rates and charges, establishing a Debt Commissioner to improve debt advice services, and granting local authorities more power to regulate credit agencies.

Description

Interest Rate and Charge Caps

The Office of Fair Trading (OFT) will be empowered to set limits on the total cost of credit and associated transactions if price competition is lacking or if charges reflect excessive risk and irresponsible lending. These limits will be reviewed annually and can be adjusted to reflect macroeconomic changes. Agreements exceeding these limits will be unenforceable, and lenders face fines (up to 10% of annual turnover) and license revocation.

Debt Commissioner

A new Debt Commissioner will be created to oversee the funding and provision of debt advice services. Funding will come from a levy on credit and debit card providers. The Commissioner's operational costs are capped at 1% of the total funds provided.

Local Authority Powers

Local authorities will gain more control over the location of licensed consumer credit agencies, allowing them to restrict their presence within specific areas.

Post Office Credit Unions

The bill mandates regulations to allow credit union services to be offered through the Post Office network.

Financial Ombudsman Service

The Financial Ombudsman Service's duties are expanded to consider the OFT's imposed credit cost limits when assessing the fairness of credit agreements. They will also be required to publish details of decisions concerning unfair or unreasonable credit costs.

Government Spending

The bill will lead to increased government spending on the Debt Commissioner and the associated debt advice services, although the exact figures are not specified in the bill's text. The bill also anticipates some revenue from the levy on credit and debit card providers.

Groups Affected

• Consumers: Potentially benefit from lower credit costs and improved access to debt advice.
• Lenders: May face reduced profitability due to interest rate caps and increased regulatory oversight. Fines and license revocation are potential consequences of non-compliance.
• Credit and debit card providers: Will contribute to a levy to fund debt advice services.
• Local authorities: Gain greater powers to regulate the location of consumer credit agencies within their jurisdictions.
• Credit unions: Will have improved opportunities to expand their services through the Post Office network.
• Office of Fair Trading (OFT): Takes on additional responsibilities for setting and monitoring credit cost limits and consulting with the Debt Commissioner.
• Financial Ombudsman Service: Will have increased responsibilities concerning consumer credit complaints.
• Debt Commissioner: Newly established body responsible for overseeing debt advice services and funding.

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