The FCA has published a proposal to issue guidance, which explains how it will interpret provisions of the Consumer Credit Act 1974 (CCA) regarding the enforcement of security in relation to a regulated credit agreement or a regulated consumer hire agreement: GC16/2: Proposal to issue guidance on the FCA’s view of enforcing security under the Consumer Credit Act 1974
In February 2015 the FCA published a consultation on proposed changes to our consumer credit rules and guidance, including in relation to guarantor loans. The regulator published a feedback statement and final rules in Policy Statement (PS15/23) in September 2015 and stated that taking or demanding payment from a guarantor (for example, under a direct debit or continuous payment authority) would not amount to ‘enforcement’ of security for the purposes of section 87 of the CCA and so would not require a default notice.
After reconsidering the matter the FCA has now revised its view of how a court is likely to interpret the relevant CCA provisions and is therefore consulting prior to issuing guidance to update the statement made in PS15/23.
This guidance is relevant to firms with regulated agreements involving a guarantee or indemnity (or other form of security), consumers and other interested stakeholders.
Whilst this guidance will not be binding on firms, the FCA will take it into account in deciding whether a firm has followed the law and whether any supervisory or enforcement action is warranted. Comments are due by 18 March 2016.