Contribution
My Lords, I hesitate to follow the noble Lord, Lord Carlile, who, although he is not a specialist in this area, is a lawyer. I will speak in support of this group of amendments; I would have done the same for the first group, had I been here. It is important that businesses and consumers alike have the protection of a law that is predictable and transparent and where no doubt arises about its interpretation. Many doubts have arisen around the judgments and rulings of the FCA and its lack of consistency. Therefore, I am sympathetic to the wish of the noble Baroness, Lady Bowles, to have something done on paper, so that we can see something before putting it through.
Both businesses and consumers are used to having a legal surround for such transactions. They go back to the 1850s in the Bills of Sale Act 1854, which was modernised throughout the end of the 19th century and then followed by the Money-lenders Act 1900, obliging the registration of moneylending and allowing the courts to be involved. It is important that we have judicial oversight, not just by updating the process—although I agree with noble Lords on that—but with a legal framework that is transparent and consistent and that allows people to see what is expected.
I am also concerned about the impact of rushing through legislation to empower an as yet uncertain regime of rule-making, about which nothing of substance is known. The FCA appears to be as unprepared for this as others. In its response last month to the Treasury’s announcement of the reform of the Consumer Credit Act, the FCA said that such reform
“is an important step towards a more flexible regime that supports effective competition and innovation, while maintaining appropriate consumer protection both now and in the future”.
It acknowledged that it would put
“greater emphasis on FCA rules and guidance rather than prescriptive requirements set out in legislation”.
It states that it intends
“to consult on the key elements of the … framework … set out in legislation”.
One problem with being flexible—or moving to what the FCA calls
“a more flexible regime that supports effective competition and innovation, while maintaining appropriate consumer protection both now and in the future”—
is that flexibility can be inconsistent and lack transparency. What is appropriate for one firm may not be so for another. It brings doubts into the minds of businesses. We have heard of businesses being concerned about the arrangements run by the FCA. For example, given that many of the requirements to disclose information in the CCA and associated regulations are to be repealed, how transparent will the rules be? How consistently will they operate? Will the FCA’s rulings be published? If they are to be less prescriptive and more in line with the FCA’s consumer duty principle, how certain can businesses be about what counts as being in scope?
Before closing, I would like to mention another concern: the considerable compliance costs. Most of the disclosure of information obligations on the CCA, and in the linked regulations being repealed and replaced by FCA rules, will bring costs. I am grateful to Addleshaw Goddard LLP for its analysis, published on its website, which suggests:
“Reforms in relation to arrears, default notices & in-life information are likely to create major operational impact for collections and arrears handling. Given the high litigation risks attached to these requirements firms should carefully consider these changes and monitor how these requirements will be re-designed in FCA rules”.
Here, we should think of the start-up costs for this new system, along with the continuing compliance costs, which will be considerable. Take, for instance, the information requirements. How will they affect the estimated 30,000 firms that will have to amend documentation that does not align with the consumer duty?
With those thoughts, I support the thinking behind the stand part notice in the name of the noble Baroness, Lady Bowles, with its question mark around the wholesale transfer of such powers without any information on how they will be operated or regulated—or, indeed, what they will be now.