Julia Williams recommends becoming completely familiar with all aspects of the consumer Credit sourcebook.
In previous articles we have explored the responsibility imposed upon consumer credit licence holders, not only to maintain their own standards by competently engaging in the activities covered by their licence without operating unfair or illegal business practices, but also, the responsibility imposed upon such licence holders for the actions of those agents/third parties with whom they chose to do business, regardless of the fact that the agent/third parties may hold their own licence.
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Under the OFT’s Debt Collection Guidance (DCG) lenders are already urged to familiarise themselves carefully with the actions of their agents/third parties when carrying out collections and recoveries activities, as their agents’ operation of unfair or illegal business practices can affect the lender’s own licence. The DCG recommends care is taken in the selection process of such agents/third parties and that complaints received are properly investigated and effective action is taken to avoid recurrence of problems.
So how does the landscape look under the FCA’s proposed new regime? The FCA’s Consumer Credit sourcebook, or CONC as it is referred to, is the specialist rule book for credit regulated activities. The CONC will be the statutory referral point for all regulated activities from 1 April 2014 and will seek to mirror across large parts of the Consumer Credit Act and the OFT’s guidances while also bringing into play some completely ‘new’ rules.
The final version of CONC is anticipated by the end of February 2014 with the new rules going live on 1 April. The FCA’s proposals will remain in consultation until the beginning of December 2013.
The FCA has encouraged the credit industry to put forward representations on its proposals; however the very tight timescale imposed before the new rules become effective is likely to result in only limited variations to the draft proposals published
by the FCA on 3 October 2013.
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By GlobalDataUnder the new proposals a firm ‘must’ ensure that employees and agents or other persons acting on its behalf comply with CONC. This could extend to affirm being directly responsible for an agent’s compliance with CONC.
At present the definition would seem to almost ‘catch all’ arguably placing a blanket obligation on lenders to ensure compliance on the part of ‘all’ of their agents from motor dealers to brokers to debt collection agencies and legal suppliers alike. This would, on the face of it, appear to have quite far reaching and somewhat onerous implications for the industry if the definition is to be interpreted in its widest possible context, with issues surrounding the vetting process, monitoring and compliance across an extremely wide audience. Currently, no further guidance is set out within CONC to assist lenders in establishing with whom exactly their duty to ensure compliance extends. As such, clarification on this point is needed from the FCA to ensure that lenders are fully aware of the extent of their statutory obligations in this regard.
Rule 7 CONC goes into detail as to the application, policies and procedures relating to arrears, default and recovery, including specific reference to ‘repossessions’. This detailed section on debt collection and enforcement mirrors across many aspects of
the existing DCG and the Irresponsible Lending Guidance.
It follows therefore that if responsibility lies with you for ensuring that all of your ‘agents’ (interpreted in the widest possible sense) comply with CONC, that you will fall to be directly responsible for compliance of all practices and procedures of those said agents and all operational aspects of their collection and recovery processes, potentially therefore including the actions of any repossession agents instructed by you.
Undoubtedly this is likely to present issues for you as a lender as regards monitoring and regulating the activities of your agents and auditing and reporting to ensure proof of compliance. It also follows that you in the first instance will have to be completely familiar with all aspects of CONC in its entirety to ensure that any third party instructed by you acts in accordance with it.
Julia Williams is director, banking and
finance, at DWF LLP
