The Consumer Credit Act 2006 changes commence implemention from 6 April 2007, and will have a significant effect on the way in which secured loan brokers carry out their business.
The main changes which will affect secured loan brokers are:
- The introduction of access to the Financial Ombudsman Service (FOS) for consumer credit customers.
- The impact of ‘unfair relationships’ provisions - this is likely to lead to lenders taking a greater interest in the way in which secured loan intermediaries do business and keep records.
- The removal of the £25,000 limit on regulated agreements.
- The ‘fitness and propriety’ requirements for renewal or granting of CCA licences - members will need to consider how they will evidence the fitness of their staff and all those who act on the firm’s behalf.
“The increased protection for consumers through access to the FOS is welcome. But this means that brokers must have clear procedures in place for handling complaints and also ensure they are keeping accurate records in case of future disputes.”
The Consumer Credit Act 2006 also introduces the concept of an unfair relationship between a lender and a borrower. The Act gives borrowers the right to challenge the fairness of their relationship with a lender. This challenge can be brought about due to anything that the lender or broker has done or not done.
Sinclair added: “Until any cases are brought before the courts, it will be difficult to define what constitutes an ‘unfair relationship’. To avoid difficulties, AFB members should review all sales and administration processes, consider the need for professional indemnity insurance for consumer credit activities, and review their record keeping procedures.”
