Topic 22 Consumer Credit Flashcards
(48 cards)
Which act covers the regulation of the following certain loans to individuals, small partnerships & incorporated bodies (not companies)?
Consumer Credit Act 2006
In April 2014 what happened to the regulatory powers for consumer?
These were transferred to the FCA
Where are the rules regarding the regulation of firms kept?
Consumer Credit Sourcebook (CONC)
The below are what in relation to the Consumer Credit Act (CONC)?
- Generally no limit to the amount of loan covered by the act
- Loans over £25K to small businesses for business purposes are exempt from regulations
- High net worth client can be exempt from act at their own request
Main provisions of the act
The below are what in relation to the Consumer Credit Act (CONC)?
- Borrowers protected by the act must include an ordinary or a partnership with 3 or fewer members
- Complaints through the act can be taken to FOS
- Provisions to increase fair treatment of borrowers
- Borrow must be given copy of credit agreement in writing
Main provisions of the act
The below are what in relation to the Consumer Credit Act (CONC)?
- Borrows have a 14 day cooling off period
- Lender must send the cooling off notice with a copy of the agreement
- Annual Percentage Rate (APR) must be calculated using a set formula (Cost of setting up the loan)
Main provisions of the act
True or False
The below do not benefit from the right to cancel using the cooling off period
- Bank overdrafts
- Small loans of £50 or less (unless hire purchase or conditional sales agreement)
- Small loans of £35 or less completed away from lenders premises
- Loans to pay death duties
True
What is the purpose for Annual Percentage Rate (APR)?
System for comparing the price of lending between providers
What does Annual Percentage Rate (APR) consist of ?
- Interest Rate
- Additional Costs (setting up the loan)
What is Annual Percentage Rate of Charge (APRC)?
Annual Percentage Rate (APR) that applies to first & second charge mortgage lending
The below are all what in relation to consumer credit?
- Representative example must be included as part of any advertisement that show a figure relating to the cost of credit. Example must include Representative APR
- Creditors must assess a borrower’s creditworthiness before granting credit
- Adequate explanations must be included in respect of a proposed credit agreement
Changes to Consumer Credit Acts (CCA) brought about by EU Credit Directive
The below are all what in relation to consumer credit?
- Certain information must be provided to a Borrower before they enter into a credit agreement
- Borrower has 14 day Cooling Off period
- Borrower must be notified in writing before the conclusion of the agreement
- Borrower is able to seek financial redress from creditor in circumstances if they are unable to obtain satisfaction from supplier of goods or services
Changes to Consumer Credit Acts (CCA) brought about by EU Credit Directive
In what circumstances could a customer seek redress from a creditor if they are unable to obtain satisfaction from a supplier of goods & services?
- Where Consumer Credit Acts (CCA) would not normally provide for such redress
- Where value of goods & services exceeds £30K & credit is not more than £60,260
To end an open-ended agreement how much notice does a borrower need to give?
1 Month
To end an open-ended agreement how much notice does a creditor need to give?
2 months and a justified reason for termination
The below are all what in relation to consumer credit?
- The borrower must be informed of the debt is to be sold to a third party
- Creditors must disclose the extent with which they are working with one or more creditors
Changes to Consumer Credit Acts (CCA) brought about by EU Credit Directive
Where an application for credit is declined based on information from a credit agency what must the creditor provide?
Notify the borrower & provide contact details of the credit reference agency
The 2nd EU Consumer Credit Directive has now come into effect offer better protection for anyone applying for credit but does it apply to the UK?
No as it began in October 2023
What is Representative APR?
APR that a lender must offer to 51% of successful applicants of a credit product
What does a Credit Intermediary do?
- Helps an individual obtain credit by helping them complete a loan application
- Find a lender with the lowest rate
- Willing to lend to those with poor credit history
The below are what in relation to the FCA’S Consumer Credit Regulation
- Consumer Credit firms must be regulated by the FCA
- The FCA maintains a registered of firms that have been granted a consumer credit licence
- FCA conduct rules apply
Examples of the more rigours provision by the FCA in relation to Consumer Credit Regulation
The below are what in relation to the FCA’S Consumer Credit Regulation
- FCA expects firms that offer consumer credit to comply with customers duty & demonstrate fair treatment to customers
- FCA has large supervisor powers & uses senior managers & certificate Regime to monitor individuals performing roles that require FCA approval or certification
- FCA has larger powers in regards investigation, enforcement & redress
Examples of the more rigours provision by the FCA in relation to Consumer Credit Regulation
What is payday lending?
Very short term borrowing to cover shortfalls in funds from one payday to the next
The measures introduced by the FCA on short term borrowing are?
Cap on:
- Interest & fees charged must not exceed 0.8% per day of amount borrowed
- Default fees cannot exceed £15
- Borrows must never be exceed 100% of amount borrowed by fees & charges
