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protecting consumers of financial services – or not January 17, 2011

Posted by Bradley in : consumers , trackback

Reading the UK consultation on reforming the consumer credit regime which was issued on 21 December (clearly not designed to be published in prime time for attracting consumers’ attention and probably noticed even less than it might have been because of the disruptive snow falls which pushed Heathrow airport to the top of the news for days (although the closing date is 22 March)) I am not at all sure what is being proposed, except that there seems to be a sort of doublespeak going on. The UK is going to have more effective protection for consumers of financial services, but it will also be “appropriate”, and “proportionate and cost effective” and there will be opportunities for “simplification and deregulation”. Shifting functions away from the OFT doesn’t seem to me necessarily to be a pro-consumer move, and there’s a suggestion (in para 2.11) that the Treasury plans to gut consumer remedies:

The Government does not expect there to be any overall dilution of current levels of consumer protection under option 1. However, it is unlikely that there would be a direct replication of the existing formulation of all CCA consumer protections in the rulebook. The regulator would need to conduct analysis of the consumer protections provided for under the CCA and would consider how best to ensure that a FSMA-style regime for consumer credit delivers at least equivalent levels of consumer protection (including whether this might require any changes to legislation). This would also include consideration of the important differences between the CCA and FSMA enforcement regimes. For example, under the current FSMA regime, breach of a rule does not make a transaction void or unenforceable or constitute a criminal offence (although it may give customers a right of court action for any loss suffered, and firms and individuals can be prosecuted for carrying out regulated activities without authorisation). However, the broader range of sanctions under FSMA may provide an equivalent level of consumer protection. It is also important to note that, to the extent that many consumer protections are enshrined in EU law through the CCD, there would in any case be limited scope for amending requirements relating to many types of credit agreements.

This suggestion that the remedies under the two regimes are broadly equivalent seems to me to be misleading in the extreme. A regime which treats certain types of agreement as being void or unenforceable is quite different from one which might give rise to a claim for losses suffered.


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