Registry Trust Consultation Response.
Introduction
Registry Trust is the non-profit organisation which runs the public Register of Judgments, Orders and Fines under contract to the Ministry of Justice. We are independent from government, and from industry, operating on the periphery of both the financial and credit information sectors. Registry Trust holds judgment records spanning the UK, and that data serves to support responsible lending. Registry Trust information is used in over 200 million lending decisions every single year.
Access to the Register of Judgments, Orders and Fines is open to all. This allows anyone to check the information on any business or individual, once they provide the correct details and payment of the fee. Users and customers of the Register include (but are not limited to) individuals and small businesses who want information when they have been refused credit; small businesses who want to check potential clients; credit reference agencies who support lenders for the underwriting of debt, and making of informed credit decisions; employers who wish to check on present and potential employees; and anyone seeking to perform some sort of due diligence prior to making a decision.
We welcome the opportunity to comment on the proposals for the reform of the Consumer Credit Act. Registry Trust is not regulated by the FCA, nor does it provide any products or services governed by the Consumer Credit Act. Registry Trust does maintain a dataset that is inextricably linked to products and services that are affected by the Consumer Credit Act, and consider ourselves well placed to make observations on some of the key changes needed to improve the Consumer Credit Act. In our response, we address those questions where we are well placed to add value. Overall, Registry Trust would welcome changes that resulted in better consumer outcomes, as outlined by the FCA (products and services, price and value, consumer understanding, and consumer support); combined with enhanced transparency, accountability, and agile, responsive regulation.
Question 1: Do you agree with these proposed principles, and do you have views about tensions between them or relative prioritisations?
Registry Trust agree with the fundamentals of the principles, and welcome a streamlined, efficient and effective approach. CCA reform is a chance to make the existing regime more effective, while also a chance to enhance recognition of, and protection of, vulnerable consumers. The only principle that seems likely to cause any tension, would be that of proportionality, given the vested interests of parties involved, and the changing understanding levels around vulnerability more generally.
Question 2: Noting the governments' Net-Zero targets, how can CCA reform remove barriers that may otherwise prevent lenders from being able to offer financing for renewable energy solutions,
such as electric vehicles and green home improvements?
We have no response to this question.
Question 3: Are there any existing definitions or concepts in the CCA which should be updated and clarified when moved to FCA rules?
If the end intention is for the FCA to ‘own’ the Consumer Credit Act, and therefore the Consumer Duty to replace part/ all of the key measures in the existing CCA, then the emphasis needs to be on helping consumers better understand their rights along the entire consumer journey. This would help to address the consumer understanding and consumer support outcomes. The current combination of the FCA Consumer Duty regulations and guidance, with the legal provisions in the CCA leave gaps which need to be clarified, for the benefit of all stakeholders.
Registry Trust would also encourage using plain and simple language throughout. There is a growing trend towards keeping language simple, in order to ensure ease of understanding for users. In this, the CCA is out of step with social trends.
Question 4: Are there concepts in the CCA which are not currently defined but which should be?
The rapid pace of change within the financial markets, which has seen innovations like payday lending, and BNPL has increased calls for change to the CCA, which has not changed significantly since 1974. It’s hard to predict quite what new concept might be introduced which would impact consumer credit more generally, but thought needs to be given on the ability of the new CCA (or delegated authorities) to rapidly assess, and if needed, regulate, new entrants to the market. Without that inbuilt agility, the same problems will rear their heads again a short way into the future.
Question 5: Do you believe the business lending scope of the CCA should be changed?
We have no response to this question.
Question 6: Do you support the conclusion of the Retained Provisions Report that most Information Requirements could be replaced by FCA rules without adversely affecting the appropriate degree of consumer protection, and that it is desirable to do so? Are there any additional factors the government should consider given the context changes since the report's publication in 2019?
Registry Trust would endorse the idea of flexible and agile regulation. To that end, moeing information requirements to the FCA rules, should be beneficial. The move from legislation to regulation should make consumer credit regulation will be more dynamic, but the FCA should commit to a process that ensured this was the case. Overall, moving the CCA information requirements to the FCA handbook should allow for simple straightforward amendments as well as faster responses in the event of consumer detriment brought about by innovation. Any future consumer credit products should then be brought into the regulatory system, without unnecessary administrative burden or costs to the firms involved.
Question 7: In what circumstances is it important that the form, content and timing of pre-contractual and post-contractual information provided to consumers is mandated and prescribed?
What are the risks to providing lenders more flexibility in this area?
Under the Consumer Duty, firms have to deliver good outcomes for customers, including understandable communication and a level of post-sale support. These changes demonstrate a shift in thinking, requiring firms to think about their consumers needs. This shift means that firms need to know and understand their customers in greater detail than before. To that end, a wholly prescriptive set of rules around form, content and timing of pre-contractual and post-contractual information means that firms have to obey rules, all without being able to apply their own knowledge of their customer, required of them by the Consumer Duty principles. The wholesale prescription of wording, terminology, timing etc all work when things are going well. When defaults, or similar occur, the legal wording, timing, etc of mandatory communications out to consumers can have negative effects. This means that either correspondence is ignored, or sends the recipients into a panic. Overall, it would be an improvement if the onus on responsible and appropriate communication was given to the relevant firms. Their role would be to ensure that where they acted outside of their processes and norms, they were able to justify that decision. It would allow firms to write to consumers in their own voice and tone, and to adapt communications to suit the communication needs of consumers.
Question 8: The Consumer Understanding outcome in the Consumer Duty posits that consumers should be given the information they need, at the right time, and presented in a way they can understand it. Does the implementation of this section, and the Consumer Duty more broadly, go some way to substitute the need for prescription in CCA information requirements?
Overall, it would be an improvement if the onus on responsible and appropriate communication was given to the relevant firms. Their role would be to ensure that where they acted outside of their processes and norms, they were able to justify that decision. It would allow firms to write to consumers in their own voice and tone, and to adapt communications to suit the communication needs of consumers. Prescription for some requirements should still be given, but allow the firms to make the judgement on how to implement those requirements. The FCA would then be well-placed to monitor and assess the effectiveness of those measures, and how they met the requirements of the Consumer Duty rules.
Question 9: Given the increasing using of smartphones and other mobile devices to take out credit products how can consumer information be delivered on devices in a way that sufficiently engages consumers whilst ensuring they receive all necessary information?
We have no response to this question.
Question 10: Are there any areas where, in your view, consumer protection legislation, rules and/or guidance, outside of the CCA, makes for appropriate levels of consumer protections and mirrors or replicates the effects of the provisions in the CCA?
We have no response to this question.
Question 11: If other consumer protection legislation, rules and/or guidance, outside of the CCA, falls short of replicating the effect of the provisions in the CCA, where do these gaps exist and how significant are they?
Registry Trust run the public Register of Judgments, Orders and Fines. As such, we see the outcomes when firms have needed to take out county court judgments against consumers. This is a part of the justice framework, and as such, is not normally considered under the purview of any FCA or Treasury consultations. Nevertheless, the data on CCJs is vital to the running of a successful economy, and the data is used in millions of lending and due diligence decisions every single year. As such, Registry Trust would urge regulators to refer to the inclusion of additional data in regulation to ensure better fairer outcomes for consumers and firms. This data isn’t regulated activity from a finance perspective, but is very much in line with data protection concerns, to ensure the timeliness and accuracy of data.
Registry Trust suggest that the following data be required by firms using the CCJ and enforcement processes.
- Dates of birth reported by regulated firms for all judgments
- Partially satisfied judgments to be reported to the courts service to allow the public Register to be updated
- All Satisfied judgments to be confirmed to the courts service
- Company numbers to be used as identifiers by court service users
- VAT numbers to be used as identifiers by court service users
Question 12: The FCA’s Consumer Duty mandates a consumer support outcome. How does the Consumer Duty interact with the rights and protections provided to consumers in the specific consumer credit regulatory regime, which currently consists of the CCA and FCA rules?
We have no response to this question.
Question 13: If it is possible to amend the FCA’s FSMA rule-making power to enable FCA rules to replicate the effect of rights and protections currently in the CCA, what is you view on the risks and benefits of doing this?
We have no response to this question.
Question 14: Are there any rights and protections provisions which you feel should not be moved to FCA rules and should remain in legislation? Please provide an explanation of why you hold these views.
We have no response to this question.
Question 15: Given this, to what extent do time orders provide additional protections to these rules and guidance? What evidence are you aware of that the existence of this right changes firm behaviour and improves consumer outcomes?
We have no response to this question.
Question 16: What is your view on the usefulness of the right to voluntary termination and its role in protecting consumers? Are there improvements that could be made to the functioning of this right?
We have no response to this question.
Question 17: To what extent do the FSMA and FOS regimes make the unfair relationship provisions unnecessary? If these provisions are to be kept in legislation, with other rights and protections moving to FCA rules, does this create more complexity and confusion for lenders and borrowers and what will the effect on innovation in the sector be?
We have no response to this question.
Question 18: Would you be supportive of HM Treasury exploring the option of amending FSMA rule-making powers in such a way to enable unenforceability to apply to breaches of FCA rules in a similar manner to how unenforceability applies under the CCA, noting there would not be a role for court action in this scenario?
We have no response to this question.
Question 19: Do you agree that the government should consider the proportionality of sanctions and ensure that they are relative to the consumer harm caused/potentially caused?
We have no response to this question.
Question 20: What types of breaches of CCA rules do you think that sanctions should attach themselves to and why? For example, should the disentitlement sanction be limited to the small sub-set of cases giving rise to unenforceability, where there is the greatest risk of harm?
We have no response to this question.
Question 21: How valuable are the CCA provisions that give rise to a criminal offence? (See Annex 2 for list of CCA provisions that give rise to criminal offences)
We have no response to this question.
Question 22: Are there are any provisions that are outdated because the practices they pertain to are not used anymore, or would removing some CCA provisions lead to the return of these
practices?
We have no response to this question.
Question 23: What is your view on the merits in increasing the standards of conduct for consumer hire agreements to make them comparable to those for consumer credit?
We have no response to this question.
Question 24: Should the section 17 provisions which enable exemptions from specific elements of the CCA and CONC continue to exist? What would be the impact of these provisions not applying?
We have no response to this question.
Question 25: How can this reform ensure that firms provide information to consumers which is accessible for a wide range of financial literacy and numeracy levels?
We have no response to this question, beyond pointing to the existence of firms who provide advice on streamlining and simplifying language to make it accessible to those operating on a wide spectrum of literacy and numeracy levels. Those for whom English is not their first language would also benefit.
Question 26: In what ways should this reform ensure that consumers’ mental health and wellbeing is supported throughout the consumer credit product lifecycle?
We have no response to this question.
Question 27: What are the key considerations that the government need to take into account when reforming the CCA to ensure that Sharia compliant loans can be expressly accommodated? Which areas of the CCA are not currently compatible with Islamic Finance, and how could they be amended to accommodate Sharia compliant loans?
We have no response to this question.
Question 28: If interest rates are prohibited for Islamic Finance products, how does the government ensure that Islamic finance and non-Islamic finance products can be easily compared, given that APR values are used for comparative purposes?
We have no response to this question.
Question 29: Are you aware of any implications of our policy approach on people with protected characteristics?
We have no response to this question.
Question 30: Do you have any views on how the government can mitigate any disproportionate impacts on protected characteristics?
We have no response to this question.