The Financial Conduct Authority should have oversight on credit card providers and instant cash loan companies, in order to regulate them more tightly, consumer groups recently said.
The Office of Fair Trading is currently the regulator of consumer credit such as instant cash loans from payday lenders, while it is the responsibility of the Financial Services Authority to oversee other retail financial services. However, MPs are currently examining the division with plans to separate the FSA into a prudential regulator and a new entity to be known as the Financial Conduct Authority.
Both Citizens Advice and Which? have come out recently in their endorsement of the new regulatory agency, remarking that the interventionist approach the FCA plans to adopt and a single point of contact would be a better fit for customers of retail financial services. The FSA’s consumer panel is understood to join the two consumer groups in its recommendation.
The panel chairman, Adam Phillips, said that the FCA would have the ability to intervene in developing issues related to short term loans and other retail offerings, if the FCA is given the ability to regulate consumer financial concerns in an effective manner. There needs to be a single regulator examining the myriad conduct issues in the financial services sector, added Mr Phillips, and Citizens Advice chief, Gillian Guy, added that it was of the utmost importance that retail lenders, debt managers, brokers, and debt collectors are all under the aegis of one regulatory body.
MPs are understood to come to a decision regarding consumer credit in the coming weeks in preparation of the financial services reform bill. The new regulatory scheme could be ready for implementation by 2013, experts say.
The legal framework around unsecured credit regulation may also be changed by the government as well. The Consumer Credit Act, which has an exhaustive array of lender rules and consumer protections, is the impetus for OFT, while a different law would govern the FCA’s ability to oversee banking and mortgage lending services.