The company is regulated by the Office of Fair Trading (OFT) and the provision of credit is regulated by the rules set out in the Consumer Credit Act 1974 as amended (‘the CCA’). The main provisions of this legislation ensure that the UK consumer credit market operates in the interests of consumers in a fair, clear and competitive way.
Current regulatory framework
The CCA and its supporting regulations cover:
- advertising, canvassing and the provision of pre-contract information to customers;
- the form and content of credit agreements;
- cancellation rights and early settlement rebates;
- debt collection procedures; and
- the granting of consumer credit licences.
Equivalent legislation applies to the company’s operations in the Republic of Ireland.
Vanquis Bank is also subject to CCA regulation. However, as it holds a banking licence, it is also regulated by the Financial Services Authority (‘the FSA’). The FSA’s regulation takes two main forms:
- regulatory capital requirements for both Vanquis Bank and the wider Provident Financial group; and
- liquidity requirements for Vanquis Bank.
Future regulatory landscape
Consumer Credit Directive implementation
The 2008 EU Directive on Consumer Credit has to be implemented in the UK by June 2010, with a transitional period for businesses to comply with the new rules by 31 January 2011. Areas where there will be changes from the current law include pre-contract information, requirements to provide adequate explanations and to assess creditworthiness, right of withdrawal, and rebates on partial early repayment. The Department for Business, Industry and Skills (BIS) has consulted on draft texts of the regulations, but these have still to be finalised. BIS is expected to publish final form regulations in March 2010.
Other regulatory initiatives
OFT High Cost Credit Review
The group is contributing to the OFT’s review of the £35bn high-cost consumer credit market which it announced in July 2009. The review, which covers a broad range of lending activities of which home credit is a relatively small element, published its emerging evidence in December 2009 and is expected to conclude in spring 2010. The implementation of any policy recommendations would be for the incoming administration to consider after the General Election. The OFT has a good understanding of home credit and the sub-prime financial services sector.
Irresponsible Lending Guidance
In July 2009 the OFT launched a consultation on draft guidance setting out the practices which appear to the OFT to involve irresponsible lending. The consultation period ran until October 2009. It was expected that the guidance would be issued by the end of January 2010. However, the OFT has recently announced that publication will be delayed until March 2010.
Credit and Store Card Regulation
BIS is currently consulting on the future regulation of credit and store cards. The Government’s response will be published by 20 April 2010 and any proposals for legislative change could only be carried out after the General Election and would then be subject to further consultation. The measures being debated centre on transparency and putting the customer in control. The discussions include a ban or restrictions on unsolicited credit card line increases. Vanquis Bank is working closely with the UK Cards Association (formerly APACS) which continues to have a constructive dialogue with BIS officials with the aim of finding a workable solution to address BIS concerns.