Analysis of the consumer credit rulebook

The Financial Conduct Authority (FCA) took over as regulator of consumer credit on April 1 2014. Consequently, all credit firms should now be complying with the rules set out in the Consumer Credit (CONC) section of the FCA’s Handbook.

The CONC sourcebook contains 15 sections:

Chapter

Content of chapter

Page number

CONC 1

Application and purpose and guidance on financial difficulties

1

CONC 2

Conduct of business standards: general

4

CONC 3

Financial promotions and communications with customers

32

CONC 4

Pre-contractual requirements

61

CONC 5

Responsible lending

83

CONC 6

Post contractual requirements

115

CONC 7

Arrears, default and recovery (including repossessions)

136

CONC 8

Debt advice

191

CONC 9

Credit reference agencies

213

CONC 10

Prudential rules for debt management firms

215

CONC 11

Cancellation

221

CONC 12

Requirements for firms with interim permission for credit-related regulated activities

228

CONC 13

Guidance on the duty to give information under sections 77, 78 and 79 of the Consumer Credit Act 1974

230

CONC 14

Requirement in relation to agents

233

CONC 15

Second charge lending

235



Here we look at the CONC provisions in detail and what they mean for firms. The format used in this guide is:

  • Rule Summary – what the rule relates to

  • Explanation – more detail on the content of the rule

  • Practical Guidance – what firms need to do in respect of the rule

Top of Form

CONC 1.1 Application and purposeBottom of Form

CONC 1.1.1



Rule Summary:

A legal statement setting out that the CONC provisions apply to consumer credit activities.

CONC 1.1.2 & 1.1.3 & 1.1.4

Rule Summary:

Firms must comply with CONC and with all other relevant rules and legislation.

Explanation:

These three sections remind firms that the CONC sourcebook is not the only one whose provisions they need to be aware of. They also need to comply with the FCA rules on supervision, systems & controls, complaints handling and handling of client monies. They need to comply with the FCA’s General Provisions, which cover areas such as fees, status disclosure and use of the FCA logo; and they need to comply with the Principles for Business, the most important of which are repeated here. Finally, firms are reminded that the Consumer Credit Act is still in force, and that its requirements still apply.

Practical Guidance:

Firms should be aware of the scope of the legislation they need to comply with, and have a comprehensive compliance monitoring plan in place to ensure they meet their obligations.Top of Form

CONC 1.2 Who? What? Where?

Bottom of Form

CONC 1.2.1

Rule Summary:

The CONC rulebook applies not just to activities which have traditionally been thought of as credit activities but also to operation of a peer-to-peer lending firm.

Explanation:

Highlights that peer-to-peer lending activities fall under the FCA’s consumer credit regime, even though they were not previously regulated by the Office of Fair Trading (OFT). All areas for which a Consumer Credit Licence was required are now regulated by the FCA.

Practical Guidance:

All firms who come under the scope of the new rulebook, including peer-to-peer lending firms who were not regulated by the OFT, need to be aware of the regulatory environment they now operate in.

CONC 1.2.2

Rule Summary:

Regulated firms are responsible for the actions of all parties who act as their agents.







Explanation:

It goes without saying that a firm is responsible for ensuring it complies with the rulebook. However, if they use third parties to provide services on their behalf, such as compliance consultants, marketing agencies, accountants etc, they cannot hold them accountable if their services are not compliant with the rules. Likewise, if a regulated firm’s financial advisers operate on a self-employed basis, the advisers are considered to be agents of the regulated firm and the firm is still responsible for their actions. The buck stops with the regulated firm.

Practical Guidance:

Firms need to carry out comprehensive due diligence on any third party they are considering outsourcing the provision of a service to. They need to have a robust system in place to ensure that any advisers who work on a self-employed basis operate in a compliant manner.

CONC 1.2.3

Rule Summary:

The FCA will consider the actions of an appointed representative (AR) to be the actions of the principal firm.

Explanation:

The principal firm – the regulated firm that agrees to take on the appointed representative – will be held responsible for any failings in the representative’s activities.

Practical Guidance:

A firm considering taking on an AR must first carry out stringent checks to ensure that they are fit and proper. They need to check that the AR firm is financially stable, and to follow a similar recruitment process as they might when recruiting a member of staff. Is the firm the type of firm they want to have within their business? Are the key individuals from the AR firm trustworthy, and do any of them have previous convictions, upheld complaints, disciplinary action or credit defaults?

Once an AR has been accepted, their activities need to be closely monitored. In addition to the usual compliance monitoring activities, such as reviews of business sold, their accounts need to be regularly scrutinised, and the principal needs to consider and mitigate any risks that the AR poses.



CONC 1.2.4

Rule Summary:

A list of the credit-related activities which are regulated by the FCA.

Explanation:

The FCA regulates lending, credit broking, debt management (counselling or adjusting), debt collecting, debt administration, providing credit information services, acting as a credit reference agency, consumer hire and operating a peer-to-peer lending firm.

Practical Guidance:

As there are some differences between which firms required an OFT consumer credit licence and which require FCA credit authorisation, if in any doubt prospective new credit firms should make absolutely sure of whether they need FCA authorisation or not. Examples of differences include a wider definition of what constitutes credit brokerage under the FCA regime; and that some firms who are supervised for credit activities by another professional body may not need FCA authorisation.

CONC 1.2.5

Rule Summary:

Firms are subject to the provisions of CONC if they are a UK resident, even if the service is provided by a related entity of the firm that is based outside the UK.

Explanation:

If an overseas subsidiary of a firm deals with a UK-based client, the consumer credit rules still apply. CONC 3, which is referred to here as an exemption, refers to the rules on financial promotions.

Practical Guidance:

If firms have overseas subsidiaries or other associated firms based abroad, they need to ensure that a robust system is in place to ensure that these associated firms comply with their obligations. This may involve an in-house compliance operation at the overseas subsidiary, or it may involve staff from the parent firm visiting the subsidiary to carry out monitoring activities.

CONC 1.2.6

Rule Summary:

Firms based in European Economic Area (EEA) countries other than the UK are not regulated by the FCA, but UK-based companies providing services in other EEA countries are.

Explanation:

Companies whose headquarters are in other countries in the EEA are unlikely to be regulated by the FCA – unless they have a UK subsidiary, in which case the UK subsidiary may hold an FCA authorisation. The regulatory system of their home state is likely to apply instead. UK-based companies are expected to ensure the same standards are maintained when dealing with clients based overseas. The EEA comprises all member states of the European Union, plus Iceland, Liechtenstein and Norway.

Practical Guidance:

Firms who have a presence in countries other than the UK must understand when the rules apply and when they do not.

Top of Form

CONC 2.1 Application

Bottom of Form

CONC 2.1.1

Rule Summary:

A purely legal statement.

Top of Form

CONC 2.2 General principles for credit-related regulated activities

Bottom of Form

CONC 2.2.1

Rule Summary:

Explains that this section applies to regulated credit firms.

CONC 2.2.2

 

Rule Summary:

Explains firms’ obligation to treat customers fairly and gives some examples.

Explanation:

Examples of what would constitute failing to treat customers fairly are given, including: marketing credit agreements to customers which are not suitable for them, high pressure selling, not treating customers responsibly when they fall into arrears and using re-possession as anything other than a last resort. This is of course not an exhaustive list and there could be many other practices which the FCA could regard as a breach of Principle 6. Reference is made here to several sets of OFT guidance: the Irresponsible Lending Guidance, the Second Charge Lending Guidance, the Credit Brokers and Intermediaries Guidance and the Debt Management Guidance. Similar references are made throughout the rulebook.

Practical Guidance:

Treating Customers Fairly’ is an extremely wide definition, and a review of recent disciplinary action taken by the FCA shows the number of different scenarios in which the regulator considers that firms have been treating their customers unfairly. Firms should note the six TCF outcomes set out by the FCA, and consider whether their procedures and practices allow these outcomes to be satisfied. Where they do not, firms should make changes as a matter of priority.

The six TCF outcomes are:

  • Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture

  • Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

  • Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.

  • Where consumers receive advice, the advice is suitable and takes account of their circumstances.

  • Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.

  • Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

CONC 2.2.3 & CONC 2.2.4

Rule Summary:

 

Firms must not use misleading trading names.







Explanation:

Rules of this nature will be familiar to firms previously regulated by the OFT. Firms must not use trading names that suggest they are a charity or helpline if they are actually providing a commercial service. Using names such as Loans For All or Speedy Money, that suggest something about the service that will be provided, should not be used unless the claims can be substantiated. In this context, website addresses and domain names are counted as being trading names. Reference is made in this section to part of the Consumer Credit Act.

Practical Guidance: 

Firms should keep a log of all trading names that they use and the dates when they were used. Before adopting any trading name, firms must ensure that the name is not misleading in anyway.

CONC 2.2.5



Rule Summary:

Explains that other areas of the FCA rulebook and the law still apply.

Explanation:

The FCA has introduced a comprehensive set of rules for firms to follow in this CONC sourcebook. However, firms still need to comply with the relevant sections of other parts of the FCA Handbook, such as the Principles for Business; and still need to comply with relevant legislation such as the Consumer Credit Act, the Consumer Protection from Unfair Trading Regulations, the Unfair Terms in Consumer Contracts Regulations and the Enterprise Act.

Practical Guidance:

Firms need to have robust systems in place to ensure they comply with all relevant rules and legislation.

Top of Form

CONC 2.3 Conduct of business: lenders and restrictions on provision of credit card chequesBottom of Form

CONC 2.3.1

Rule Summary:

Explains that this section applies to regulated credit firms.

CONC 2.3.2

Rule Summary:

Firms are required to explain the key features of credit agreements to clients

.

Explanation:

The key features of credit agreements are things such as: the name and address of the lender, the name and address of the borrower, the policy number, the amount borrowed, the term of the agreement, the required repayments and how often they need to be made, the total charge for credit including fees, the Annual Percentage Rate, the consequences of missed payments, cancellation rights and how to make a complaint.

Practical Guidance:

If a firm is giving advice, all advice must be suitable for the customer’s needs and circumstances. If not giving advice, it must still provide sufficient information to allow the customer to make an informed choice as to whether to proceed with any product they are considering. Firms should ensure that customer-facing staff know what explanations need to be provided.

CONC 2.3.3

Rule Summary:

Firms should monitor the repayment records of all borrowers, and take action where appropriate.



Explanation:

Firms must monitor the repayment record of all borrowers, and make contact with those who fail to meet their obligations as set out in the credit agreement.

Practical Guidance:

A firm should have the systems and controls in place so that it can identify customers with repayment difficulties at the earliest opportunity. Borrowers in financial difficulty must be treated fairly, and every effort must be made to provide a suitable solution to their difficulties, such as agreeing an alternative repayment structure, before more formal debt collection methods are used.

CONC 2.3.4

Rule Summary:

Firms must ensure that any brokers they deal with are themselves FCA authorised.

Explanation:

Lenders and other credit firms sometimes deal with credit brokers – say a lender might sell their loans through a broker. Any such broker must be either authorised by the FCA, or be an appointed representative of an authorised firm, and it would be the lender’s responsibility to check this.

Practical Guidance:

A firm may pass client information to credit brokers, or receive leads from them. If it deals with brokers in any way, it must be satisfied that they are also authorised by the FCA. This can be checked on the Financial Services Register and the Consumer Credit Interim Permissions Register.

CONC 2.3.5

Rule Summary:

Sets out the circumstances in which firms can provide credit card cheques to customers.

Explanation:

Credit card cheques can only be provided to customers who have asked for them. Only one issue of cheques can be provided in respect of each request, and up to three cheques can be provided in each of these issues.

Practical Guidance:

Firms should have systems in place for ensuring that they comply with these requirements, and for ensuring that staff are aware of the restrictions in this area.

Top of Form

CONC 2.4 Credit references: conduct of business: lenders and ownersBottom of Form

CONC 2.4.1

Rule Summary:

Explains that section 2.4 applies only to lenders and consumer hire firms

Practical Guidance:

Lenders and hire firms must ensure they are familiar with the rules in this chapter

CONC 2.4.2

Rule Summary:

Relates to a lender’s responsibilities to inform credit reference agencies when they decline applications made via brokers.



Explanation:

Before the lender informs a broker that it has rejected a client’s application for credit, it must either inform the customer directly of this rejection; or alternatively must give the broker contact details of any credit reference agency it has used to seek information about the applicant. The SI reference in the rulebook here is to the Consumer Credit (Conduct of Business) (Credit References) Regulations

Practical Guidance:

Firms need to have systems in place to ensure that they comply with these obligations, and that all relevant staff are aware of the requirements.

CONC 2.4.3

Rule Summary:

Firms should not carry out credit searches in respect of potential customers who have not yet decided whether to go ahead.

Explanation:

Credit reference agencies should only be used to source information about customers once they have applied. It is not acceptable to carry out a credit search if they have just made an enquiry about credit.

Practical Guidance:

Firms should have arrangements in place to allow potential customers to obtain quotations as to the likely cost of credit before they make any decisions. All relevant staff need to know that credit searches can only be performed on those who make an application.

Top of Form

CONC 2.5 Conduct of business: credit brokingBottom of Form

CONC 2.5.1

Rule Summary:

Confirms that this section relates to credit brokerage firms.

Practical Guidance:

All brokers need to confirm they are aware of the rules in this chapter.



CONC 2.5.2

Rule Summary:

Confirms the scope of the rules in section 2.5.

Explanation:

This section applies to all credit agreements and consumer hire agreements, even those that are exempt under the Regulated Activities Order

Practical Guidance:

Firms should ensure that they have compliance procedures in place to cover all credit agreements and consumer hire agreements



CONC 2.5.3

Rule Summary:

This relates to obligations to explain credit agreements and to ensure suitability of advice, and to data protection obligations.





Explanation:

Customers must always be given a reasonable time to consider a credit agreement or consumer hire agreement before committing to a loan. Where the broker offers advice, any recommended products need to be suitable for the client’s needs and circumstances.

Where a customer’s details are to be passed to a third party, their consent for this must be obtained, and it must be explained to them why their details are being passed on.

If customer details are gathered for the purposes of making an introduction to another firm, and that firm is linked to the first firm, then the first firm must explain the association to the customer.

As regards customers’ personal data, firms must inform customers of how their data is used, allow customers to cancel processing of their data if they so wish, inform customers who enquire of where their data was obtained from and ensure that data is not passed to non-regulated firms

Practical Guidance:

Firms must ensure that they give all of their customers adequate time to consider their proposed agreements. Where advice is given, advisers must understand the standards expected of them, and there should be robust systems in place for monitoring the quality of advice. Firms must be conversant with the Data Protection principles and ensure all data is handled in accordance with these.



CONC 2.5.4

Rule Summary:

Makes reference to use of privacy notices.

Explanation:

Provision 6 of CONC 2.5.3 requires firms to inform customers of how their personal data will be used. One way of doing this is to issue them with a privacy notice.

Practical Guidance:

Firms who make use of privacy notices must ensure they comply with the Privacy Notice Code of Practice of the Information Commissioner’s Office (ICO). This Code and an example of the format of a privacy notice can be found on the ICO website.



CONC 2.5.5

Rule Summary:

Relates to informing the customer of any credit reference agencies used.

Explanation:

If a broker makes use of a credit reference agency during the course of their dealings with clients, and has conducted negotiations on the client’s behalf at any stage, they must inform the client of the name and address of this agency.



Practical Guidance:

Firms must ensure all client-facing staff are aware of this requirement, and have systems in place for checking that it is carried out.



CONC 2.5.6

Rule Summary:

Relates to informing the customer of any credit reference agencies used

Explanation:

If a broker makes use of a credit reference agency during the course of their dealings with clients, and has not conducted negotiations on the client’s behalf at any stage, they must inform the client of the name and address of this agency within seven days should the client request these details.

Practical Guidance:

Firms must ensure all client-facing staff are aware of this requirement, and have systems in place for checking that it is carried out.



CONC 2.5.7

Rule Summary:

Credit searches must not be carried out before applications are made

Explanation:

Because of the damage to a credit file that can be left by carrying out a credit search, brokers must not carry out such a search for a customer who is simply shopping around and who has not yet made a decision to apply. Firms should instead have appropriate ‘quotation search’ facilities to allow customers to ascertain the cost of credit were the loan to be taken via them.

Practical Guidance:

Firms must ensure that all relevant staff know that credit searches should only be carried out on applicants.



CONC 2.5.8

Rule Summary:

A comprehensive list of what are considered to be ‘unfair business practices’.

Explanation:

Firms must not make unsolicited calls to people who appear on the Telephone Preference Service register, or to those who have requested not to receive marketing calls. The only exception is for existing customers who have consented to receiving such calls, and who have been given the opportunity to opt out of receiving such calls.

Firms must not use automated calling systems or send electronic communications (e.g. text, email) to anyone who has requested not to use such systems.

A firm’s employees or agents must not make contact at unreasonable hours (including any time of day which would normally be considered ‘social’ hours, but for which they have reason to suspect might constitute ‘unsocial’ hours for a certain customer)

A broker firm’s employee or agent must leave a customer’s home immediately if they are requested to do so.

Firms must not make inappropriate use of premium rate telephone numbers, including keeping a customer on the line for an unduly long time when they have made the call.

Firms must not offer inappropriate inducements to complete a credit application quickly.

Firms must not refer clients to other parties when they clearly do not meet that other party’s lending or hiring criteria.

Firms must not suggest to customers that an application will be approved for the full amount when a lower amount may actually be offered; or grant more credit than has been requested when this is not in the customer’s interests and is done for personal gain.

Firms must not favour the products of one lender over another when this is not in the customer’s interests and is done for personal gain.

Firms must not exert pressure on customers to purchase payment protection or other insurance products, or offer undue incentives to do so. Firms must not discourage customers from purchasing such insurance from another firm.

Firms must not encourage customers to take out secured credit to replace unsecured credit where this is not in the customer’s interests.

Firms must not encourage customers to increase, refinance or consolidate their debt if this would lead to the required repayments becoming unaffordable.

Firms must not encourage customers to take out additional credit, or extend the term of a credit agreement, unless this is in the customer’s interests.

Firms must not accept remuneration from clients for making introductions to firms offering types of credit that are different to the type they are seeking, unless the customer consents to this. Firms must also not take fees from client bank accounts without the client’s permission.

Firms must not pass customer data to third parties if consent has not been obtained, or if the purpose of passing on the data is different than the reason stated when consent was sought.

Practical Guidance:

A great deal here for firms to take note of. But any responsible brokerage firm will hopefully agree that the activities listed constitute unfair practice.









CONC 2.5.9

Rule Summary:

Additional guidance on what constitutes unfair practice. In some areas the rulebook is worded so as to give examples of good practice, and in others to give examples of bad practice.

Explanation:

Suggesting that an offer of credit may be withdrawn, or offered on inferior terms if the customer delays signing an agreement, is likely to be an ‘inappropriate inducement’ to conclude a deal quickly.

Unfair use of premium rate phone lines is likely to include specifying a premium rate number to make a complaint or request a refund, or keeping a customer who has phoned in on the line for longer than 15 minutes.

Fees payable, or at least an indication of the basis on which fees will be calculated, should be disclosed to the customer at the start of the client relationship, or as soon as practical thereafter. The information should be provided in a ‘durable medium’, i.e. a format that the customer can refer back to at a later date, such as in writing or by email. Oral disclosure does not constitute a durable medium.

If a firm makes an introduction to another firm for a type of credit that is different to the type the customer was seeking, at the same time as the customer’s consent is obtained, the risks and key features of that form of credit should be explained.

Firms should seek the customer’s consent to pass data to third parties wherever practical, even though in limited circumstances the Data Protection Act allows this to be done without consent. An example of inappropriately passing personal data without consent would be giving it to a claims management company in exchange for a fee.

Practical Guidance:

Again, hopefully responsible brokers already agree that the examples given are either good or poor as appropriate. But all firms should take note of these examples and consider how they can be applied in their firms.



CONC 2.5.10 & 2.5.11

Rule Summary:

Clarification of the insurance definitions used in CONC 2.5.8

Explanation:

Payment protection insurance (PPI) is a short-term product which either pays the loan repayments in certain circumstances, usually accident, sickness or unemployment; or under which payments are suspended in certain circumstances. Debt waiver and debt freeze fall under this definition of PPI.

Short-term income protection is insurance which pays a pre-determined amount directly to the policyholder in the event of accident or sickness, for a term not exceeding five years.

Practical Guidance:

Firms should ensure they are conversant with these definitions.



CONC 2.6 Conduct of business: debt counselling, debt adjusting and providing credit information services

CONC 2.6.1

Rule Summary:

Clarifies that this section refers to debt counsellors, debt adjusters and providers of credit information services.

Practical Guidance:

These types of firm should ensure they are familiar with the rules in this chapter.



CONC 2.6.2

Rule Summary:

Refers to handling of personal data

Explanation:

Firms must inform customers of how their personal data will be processed

Practical Guidance:

Firms need to ensure that all customers are informed of this





CONC 2.6.3

Rule Summary:

A list of what are considered to be ‘unfair business practices’

Explanation:

Firms must not exert pressure when attempting to sell its services, or take advantage of a customer’s lack of understanding of credit in order to do so.

Firms must not visit customers, or make appointments to do so, at unreasonable hours (including any time of day which would normally be considered ‘social’ hours, but for which they have reason to suspect might constitute ‘unsocial’ hours for a certain customer). Visits must also not be unduly long in duration.

A firm’s employee or agent must leave a customer’s home immediately if they are requested to do so, and must comply with any requests not to return.

If a customer calls in on a premium rate number, firms must not keep them on the line for an unduly long period.

Practical Guidance:

A few important things for firms to note here. But any responsible firm will hopefully agree that the activities listed constitute unfair practice.



CONC 2.6.4

Rule Summary:

Guidance on what constitutes unfair practice

Explanation:

Firms cannot promote their services away from their own premises, such as by making unsolicited visits to people’s homes.

Firms should ensure that customers do not ring in on premium rate phone lines where the conversation is likely to take more than 15 minutes. It is considered unlikely that any call made to a firm concerning debt adjusting, debt counselling or credit information services should last longer than 60 minutes, and that any call from a customer simply to check the status of their case should last longer than five minutes.

Practical Guidance:

Firms should ensure that their canvassing activities are conducted from their own premises, and comply with section 153 of the Consumer Credit Act. They should ensure that customers are not kept on the phone for unduly long periods, and certainly not for longer than the periods specified in this section of the rulebook.







CONC 2.7 Distance marketing

CONC 2.7.1

Rule Summary:

Sets out when the provisions of this section apply

Explanation:

Except for consumer hire firms and professional firms, this section applies to any UK-based firm that conducts activities with remotely-based customers, even if they are not based in the UK but in other countries of the European Economic Area.

Practical Guidance:

Firms should ascertain if the distance marketing rules are likely to apply to them, and ensure they are aware of the requirements if they do.



CONC 2.7.2

Rule Summary:

Sets out when the distance marketing rules apply, and when they do not

Explanation:

The distance marketing rules under the Distance Marketing Directive are set out in Annex 1 to Chapter 2 of CONC. These set out 20 disclosure obligations for firms to follow when offering distance contracts. Distance contracts involve the sale of a product or the provision of a financial service under a dedicated process for providing this remotely, and where there is no physical meeting between the firm and the customer at any stage. However, many of the 20 obligations do not apply to many payment services agreements and credit agreements.

Practical Guidance:

Firms who conduct business remotely must ensure they know the requirements of the distance marketing rules, and when it applies and when it doesn’t. A one-off sale made via telephone, internet or postal means will not fall under the distance marketing rules if the firm usually offers its services on a face-to-face basis.



CONC 2.7.3

Rule Summary:

Sets out high-level requirements for how the distance communications must be made

Explanation:

Firms must start by explaining why it is necessary to provide all of the distance marketing information. It must be provided in a clear and understandable way that is appropriate to the distance communication method being used.

Practical Guidance:

Firms will be familiar with the FCA’s Principle 7, which requires firms to communicate with their clients in a way which is clear, fair and not misleading. This rule echoes similar sentiments. Firms must consider the best way of communicating the required information given the method of communication they are using.



CONC 2.7.4

Rule Summary:

Sets out what needs to be said at the start of a telephone call

Explanation:

A firm must identify itself at the start of a telephone call made for the purposes of concluding a contract at a distance. It must also commence by making clear the purpose of the call.



Practical Guidance:

Firms need to start telephone calls by giving their firm name and by making it clear that the call is in connection with the provision of a financial service.



CONC 2.7.5

Rule Summary:

Relates to contractual disclosure obligations

Explanation:

All information which firms are contractually obliged to disclose prior to the commencement of a contract must still be disclosed under a distance contract.

Practical Guidance:

Firms must ensure that any information they are legally obliged to disclose before they commence a face-to-face relationship with a client is still disclosed before the start of a distance relationship.



CONC 2.7.6

Rule Summary:

Sets out the ‘durable medium’ requirement

Explanation:

All required distance marketing information needs to be provided in a durable medium, i.e. a format that the customer can refer back to.

Practical Guidance:

Firms must ensure that all disclosure requirements are executed via a durable medium. Simply giving the information via telephone would not be acceptable, except in the unlikely event that a recording of the call was then sent to the customer. A letter, written disclosure document or email that a client can refer back to would meet the requirement. (But see the comments on CONC 2.7.11 below for details of disclosure requirements in telephone communications).



CONC 2.7.7

Rule Summary:

Two very different topics – the exemption for consumer hire and the need for a firm to communicate information even if another firm does it on its behalf.

Explanation:

The distance marketing rules do not apply to consumer hire agreements, but the Consumer Protection (Distance Selling) Regulations 2000 do apply.

Where one firm acts on behalf of another, and the agent provides the required contractual information, the principal firm must also do so.

Practical Guidance:

Consumer hire firms must ensure they are aware of the Consumer Protection (Distance Selling) Regulations 2000, and that they comply with them.

Firms must disclose the required information to their customers in all circumstances. For example, a lender must provide the required information to their customers even if a customer uses a broker who also provides it.



CONC 2.7.8

Rule Summary:

Relates to when a distance marketing contract may begin

Explanation:

A contract concluded at a distance may only commence when the customer gives their approval for this to happen

Practical Guidance:

Firms must ensure that contracts do not commence until customer approval has been obtained



CONC 2.7.9

Rule Summary:

Sets out that the rules only apply to an initial agreement

Explanation:

Where an initial service agreement is drawn up between the firm and the customer, and subsequent dealings are of the same nature as the initial dealings, then only the initial dealings are subject to the distance marketing rules.

Practical Guidance:

Firms must consider carefully whether their subsequent dealings with a distance customer are of the same nature as those outlined in their initial service agreement. Only if they can satisfy themselves of this can they disregard the distance marketing requirements at a later stage.



CONC 2.7.10

Rule Summary:

Sets out when the distance marketing rules apply when there is no initial agreement



Explanation:

When no initial service agreement exists between the firm and the customer, the distance marketing rules apply when the first task is performed. If this initial task is not repeated within the first 12 months of the relationship, then the rules will apply again when the task is performed again.

Practical Guidance:

Firms should identify when tasks are repeated and how long it has been since the task was last performed, and should thus be able to work out when to re-apply the distance marketing rules.







CONC 2.7.11

Rule Summary:

Explains the exemption to the distance marketing disclosure requirements for telephone-based communications

Explanation:

If communications regarding a distance contract are talking place via telephone, then the firm can seek the customer’s consent to only provide limited disclosure information during the call – such as the name of the caller, a description of the service offered, price information, tax information and cancellation rights – with the remaining information to follow in a durable medium before the contract is concluded. The firm must state during the call that additional information is available on request.

Practical Guidance:

Firms who decide not to give all the required disclosure information during a telephone call must ensure that firstly they give the limited information they have to, secondly that they seek the customer’s consent to proceed on the basis of that limited information, and thirdly that all of the required disclosure information is then provided in a durable medium in good time before the conclusion of the contract.



CONC 2.7.12

Rule Summary:

Sets out an exemption to the need to provide the disclosure information prior to conclusion

Explanation:

If a customer requests that a contract is concluded via a method that does not allow all of the required information to be provided in a durable medium, then it will suffice to provide the information in a durable medium immediately that the contract concludes.





Practical Guidance:

This situation is perhaps most likely to arise where a customer insists on concluding a contract in a telephone call. The required information must then be posted, emailed or provided in another durable medium as soon as possible after the contract is concluded.



CONC 2.7.13

Rule Summary:

Explains the approach to be followed when a contract includes both payment and non-payment elements

Explanation:

We have already seen in CONC 2.7.2 that payment services contracts are exempt from the distance marketing rules. But if a contract contains elements of both payment and non-payment services, then the exemption is only applicable to the payment elements, and the rules need to be followed in full for the non-payment elements. A reminder is also given here that disclosure requirements for payment services need to comply with Part 5 of the Payment Services Regulations.

Practical Guidance:

Firms need to identify when a contract contains both payment service elements and other components, and to ensure they apply the correct rules to each part.



CONC 2.7.14

Rule Summary:

Explains customers’ rights in choosing the method (s) of distance communication used

Explanation:

Customers have an absolute right to receive disclosure information on paper, i.e. in a hard copy posted to them. They also have the right to request a change to the method of communication used, such as from the internet to the postal service, and such a request should be complied with unless it is impractical to do so.

Practical Guidance:

Firms should comply with requests to change the method of distance communications used, unless it would be impractical to do so.



CONC 2.7.15

Rule Summary:

Refers to the implications if an unsolicited service is provided to a customer.



Explanation:

In the event that services are provided to a customer that they did not elect to receive, then the firm cannot force a customer to comply with their obligations under a distance contract. Simply because a customer does not reply to an invitation to provide a service does not mean that they have consented to do so. However, this provision does not apply when a contract is due for renewal, where the absence of any indication to the contrary can be used as an indication that a customer is willing to renew the contract, provided that the original terms of the contract allow for this.

Practical Guidance:

Firms should firstly endeavour not to provide any services of an unsolicited nature, but in the event that they do, they must take care not to force customers to comply with their obligations under a distance contract.



CONC 2.7.16

Rule Summary:

Explains that customer waivers have no relevance to application of the distance marketing rules.

Explanation:

Just because a customer indicates that they are not concerned about a firm following the distance marketing rules does not mean that the firm is then allowed to waive some of these rules. All of the distance marketing rules must be followed in all cases, except where exemptions apply.

Practical Guidance:

Firms must always follow the distance marketing rules, and should disregard any indications from customers about whether they require the rules to be applied. For example, all of the disclosure information must be provided, even if a customer suggests they are not concerned about receiving this information.



CONC 2.7.17

Rule Summary:

Explains that the distance marketing rules apply even if the law of a foreign country applies to the contract.

Explanation:

If the law of a country outside of the European Economic Area (EEA) will apply to a distance contract, but the contract has a close link with any EEA state, then customers are still entitled to the protection they enjoy under the distance marketing rules.

Practical Guidance:

Firms operating internationally must be aware of when the distance marketing rules will still apply to contracts with an overseas element.



CONC 2.8 E-commerce

CONC 2.8.1

Rule Summary:

Sets out that this section applies to e-commerce transactions.

Explanation:

The term ‘information society service’ is used for a service delivered by electronic means.



CONC 2.8.2

Rule Summary:

Explains the basic information to be provided in an e-commerce transaction.





Explanation:

Whenever a firm provides a service via electronic means in return for remuneration, it must provide the following information: its name; its postal address; its contact details including e-mail address; and a statement of its regulatory status, and that this can be checked on the Financial Services Register and its registration number on that register.

Professional firms must state: the relevant professional body they are a member of, their professional title and the country in which this was granted, a reference to the professional body regulations they are bound by and how these rules can be accessed, and the firm’s VAT number if they carry out VAT-registered activities.

Practical Guidance:

Firms must ensure that these details are clearly stated whenever they conduct electronic transactions.



CONC 2.8.3

Rule Summary:

Relates to price disclosure.

Explanation:

The price of any service must always be clearly and unambiguously stated, and if taxes and/or delivery costs are included in the price given, this must also be stated clearly and unambiguously.

Practical Guidance:

Firms must ensure that they are upfront with their customers as to how much their services will cost, and that this is clearly explained.



CONC 2.8.4

Rule Summary:

Sets out some high level requirements for commercial e-commerce communications.

Explanation:

A commercial communication or promotion of any kind must be clearly identifiable as such. It should be clear who has issued the communication or promotion, and any qualification criteria for a promotion should be clearly stated.

Practical Guidance:

Firms should ensure that anything they issue which might be seen as a commercial communication or a promotion makes it clear it has come from that firm, and that it is easily recognisable as a commercial communication or promotion.





CONC 2.8.5

Rule Summary:

Relates to unsolicited commercial communications being identifiable as such.

Explanation:

If a commercial communication sent via email is unsolicited, then it must be in a form such that any recipient would be expected to be able to identify it as a commercial communication immediately.

Practical Guidance:

Firms must ensure that all their commercial communications are clearly identifiable as such.



CONC 2.8.6

Rule Summary:

Relates to information that needs to be provided when carrying out an e-commerce transaction.

Explanation:

Firms must provide customers with all the technical information they need to be able to complete the e-commerce transaction on their computer or other device.

Firms must inform customers of whether the firm or the customer will complete the contract, and whether a copy of this contract will be available for the customer to view whenever they wish.

Customers must be provided with the means to check for input errors prior to conclusion of the contract, and there must be a means by which these errors can be corrected.

Firms must inform customers of the language (s) in which it is possible to conclude the contract.

If any codes of conduct apply to the contract, electronic links to these codes must be provided.

Where an electronic order is made, firms must promptly acknowledge this order, via electronic means.

Practical Guidance:

Firms must ensure their electronic systems allow the rules in this section to be complied with.



CONC 2.8.7

Rule Summary:

Clarifies one point in CONC 2.8.6.

Explanation:

Both the electronic order and the acknowledgement referred to in CONC 2.8.6 are deemed to have been received once the recipients are able to access them.

Practical Guidance:

Firms should make themselves aware of the exact point at which these last two rules take effect.



CONC 2.8.8

Rule Summary:

Relates to the format in which contractual information must be provided.

Explanation:

Contractual information must be provided in a format in which the recipient can store and reproduce it, such as a printable document or internet download.

Practical Guidance:

Firms must ensure that all of their contractual information is provided in a suitable format.



CONC 2.8.9

Rule Summary:

Explains a key exemption to the rules in CONC 2.8.6 on the provision of technical information.

Explanation:

The requirement to provide certain information before the order is placed, as laid out in CONC 2.8.6, does not apply if the contract is concluded exclusively by email.

Practical Guidance:

Before relying on this exemption, firms should ensure that only email methods of communication have been used throughout the process.



CONC 2.9 Prohibition of unsolicited credit tokens

CONC 2.9.1

Rule Summary:

Confirms that this section applies to all regulated credit firms.

Practical Guidance:

All credit firms must be aware of the provisions of this chapter.



CONC 2.9.2

Rule Summary:

Explains when credit tokens can and cannot be given to customers

Explanation:

A credit token is a token which can be exchanged for cash, goods or services provided on credit.

Such a token must only be given to customers who have consented to receiving them by giving their signed consent.

The only permitted exception is where the token is given out under an agreement with the customer that is already in force, or under an agreement where the terms allow for automatic renewal.

Practical Guidance:

Firms should ensure that credit tokens are only supplied in the circumstances permitted.



CONC 2.9.3

Rule Summary:

Relates to application of the Consumer Credit Act and the Payment Services Regulations

Explanation:

Although section 51 of the Consumer Credit Act was repealed in 2000, its provisions still apply under the Payment Services Regulations. This section concerns the provision of credit card cheques, and asks that they are only provided to customers who have asked for them, and that no more than three such cheques are provided for each request. If one request is made in respect of more than one credit token agreement, this request can be treated as one request for each agreement.

Practical Guidance:

Firms must ensure they are aware of, and follow, the requirements regarding the issue of credit card cheques.



CONC 2.10 Mental capacity guidance

CONC 2.10.1

Rule Summary:

Clarifies when this chapter applies.

Explanation:

This chapter applies to all firms offering a credit agreement, or significantly increasing the amount of credit offered under an existing agreement, or offering a limit on a running account credit arrangements such as an overdraft.

Practical Guidance:

Firms should ensure they understand when they need to apply the provisions of this chapter.



CONC 2.10.2

Rule Summary:

Explains relevant legislation in this area.

Explanation:

Relevant legislation includes the Mental Capacity Act 2005 and the Adults with Incapacity (Scotland) Act 2000. The Ministry of Justice also has a Mental Capacity Act Code of Practice. Reference is also made to the need to understand the circumstances of the individual customer when applying mental capacity guidance and legislation. Agents and appointed representatives of an authorised firm are also subject to this legislation.

Practical Guidance:

Firms must ensure they understand what the relevant legislation and guidance in this area is.



CONC 2.10.3

Rule Summary:

Defines mental capacity.

Explanation:

Mental capacity is an individual’s ability to understand, remember and consider relevant information, and to make judgements based on this.

Practical Guidance:

Firms should ensure they are conversant with this definition.





CONC 2.10.4

Rule Summary:

Explains when a firm should treat a customer as mentally incapacitated.

Explanation:

The default position must be to assume that a customer is not mentally incapacitated, but to be ready to alter this view if the firm picks up indications of mental incapacity, or is told by another person who would be expected to know about such a condition.

Practical Guidance:

Firms should be alert to any suggestions that any of their customers might be suffering from mental incapacity.



CONC 2.10.5

Rule Summary:

Clarifies further the criteria to be used to judge mental incapacity.

Explanation:

Even if the firm suspects that a customer is mentally incapacitated, it should not consider the customer as unable to make a borrowing decision unless it has attempted, without success, to assist the borrower in reaching that decision.

Practical Guidance:

Where a firm identifies a customer as mentally incapacitated, they must be prepared to try and assist that person as much as possible in reaching a borrowing decision.



CONC 2.10.6

Rule Summary:

Gives examples of mental disorders.

Explanation:

Mental incapacity may occur as a result of conditions such as a mental health condition, dementia, a learning disability, a developmental disorder, a neurological disability or brain injury and alcohol or drug dependency.

Practical Guidance:

Firms should be aware of all the reasons why mental capacity may occur, and should treat any customer known or suspected to have one of these conditions as a vulnerable customer requiring assistance under the provisions of this chapter.



CONC 2.10.7

Rule Summary:

Refers to the fact that firms must not make undue assumptions about customers showing signs of mental incapacity.

Explanation:

Even if the firm has identified that a customer may have one of the conditions listed in CONC 2.10.6, it must not automatically assume that the customer cannot make their own borrowing decisions.

Practical Guidance:

Firms should consider the nature of their dealings with customers, and make a reasonable judgement as to whether the customer is able to make an informed borrowing decision of their own accord.



CONC 2.10.8

Rule Summary:

Gives some indications of mental incapacity.

Explanation:

Indications of mental incapacity might include:

  • An existing customer makes an unexpected or out of character decision

  • A relative, friend, carer or doctor raises concerns with the firm about a customer’s mental capacity

  • The firm knows or has reason to believe that the customer has been diagnosed with a mental impairment

  • The customer does not appear to understand the product they are applying for

  • The customer does not appear to understand key information relating to the contract

  • The customer appears unable to recall information provided to them by the firm

  • The customer appears unable to consider the information provided to them by the firm

  • The customer is unable to communicate their borrowing decision to the firm

  • The customer does not understand basic personal information that the firm requires, such as date of birth or address

Practical Guidance:

All customer facing staff should be made aware of these indications, and how to proceed if any of the indications are present in a customer





CONC 2.10.9

Rule Summary:

Concerns discrimination against those with mental incapacity, and lending decisions for customers of this type.

Explanation:

Firms must not discriminate unfairly against customers with mental incapacity. However, if the firm believes that a customer’s incapacity could give them cause to have a credit agreement declared void or unenforceable, it is entitled to make a decision not to lend to that customer, or not to increase its level of lending to that customer.

Practical Guidance:

A fair decision on whether to lend to a mentally incapacitated customer must still be made, but firms must also consider whether a credit agreement would be enforceable given the information they have about the customer’s condition.



CONC 2.10.10 & CONC 2.10.11

Rule Summary:

Customers must have procedures in place for dealing with customers with mental incapacity.

Explanation:

Firms must ensure they have documented business procedures for dealing with customers with mental incapacity, including procedures for dealing with mentally incapacitated customers who go into arrears. These procedures must ensure that these customers are treated fairly.

Practical Guidance:

More details are given in CONC 2.10.12, but firms must ensure all customers are treated fairly at all times, including those with mental incapacity.



CONC 2.10.12

Rule Summary:

Explains how customers with mental incapacity might be handled.

Explanation:

Firms must provide all reasonable assistance to customers with mental capacity issues. Decisions on whether to lend must consider all available information and meet the principle of responsible lending. Risks to the customer caused by their mental capacity must be mitigated where possible.

Practical Guidance:

When dealing with mentally incapacitated customers, firms must think carefully about how they can assist them, and take the utmost care when making their lending decisions.



CONC 2.10.13

Rule Summary:

Addresses the balance between a person’s right to make a decision and the need to protect that person.

Explanation:

All applicants have a right to make their own decisions, and this right must be respected, but it must also be balanced against the need to protect them against the consequences of a bad decision when they are unable to reach a considered decision themselves.

Practical Guidance:

If a firm identifies that a customer has mental capacity limitations, and believes that their decision making abilities are restricted, it must not allow them to reach a borrowing decision without appropriate assistance.



CONC 2.10.14

Rule Summary:

Relates to providing information in a clear manner.

Explanation:

Although this appears in the mental capacity section, this rule does not make specific reference to mental incapacity. Instead it refers to the need to provide information to all customers in a way which is clear, fair and not misleading, and to consider how information could be presented in a more user friendly format.

Practical Guidance:

Firms should ensure that all information provided to customers is as clear and unambiguous as possible.



CONC 2.10.15

Rule Summary:

Refers to what might be a trigger for applying the mental incapacity procedures.

Explanation:

CONC 2.10.6 listed a number of indications that a customer may be mentally incapacitated. Any of these indications might reasonably lead the firm to decide to invoke its special procedures for assessing if a customer can understand the contract, whether they can afford the payments and whether the contract is suitable for them.



Practical Guidance:

Firms should be alert to any indications that a customer might be mentally incapacitated, and should consider what additional protections are appropriate for any such customer.



CONC 2.10.16

Rule Summary:

Relates to the design of policies and procedures with mentally incapacitated customers in mind.

Explanation:

Firms should design their standard policies and procedures for dealing with customers in such a way that the mentally incapacitated customer has a reasonable chance of being able to overcome their limitations.

Practical Guidance:

Firms should consider this when designing their standard procedures.



CONC 2.10.17

Rule Summary:

Relates to giving mentally incapacitated customers time to make decisions.

Explanation:

Mentally incapacitated customers should be given sufficient time to allow them to consider the information they have been given and to reach a borrowing decision. They should be allowed to defer a borrowing decision until a later date should they wish to.

Practical Guidance:

Firms must ensure that mentally incapacitated customers are not rushed into decisions.



CONC 2.10.18

Rule Summary:

Relates to firms’ scrutiny of applications from mentally incapacitated customers.

Explanation:

Firms must apply a high level of scrutiny to applications from mentally incapacitated customers to reduce the risk of them entering into unsustainable borrowing arrangements.

Practical Guidance:

Firms must look more closely at applications from mentally incapacitated customers than they would for other customers. For example, if a firm checks a sample of advised sales to assess suitability, it should ensure that cases involving mentally incapacitated customers are always checked.

CONC 2.10.19

Rule Summary:

Relates to balancing risks when dealing with mentally incapacitated customers.

Explanation:

Firms must balance the risks of customers taking out unsustainable credit agreements with the possibility of unfairly denying credit to an applicant. A customer who is known or suspected to have mental capacity issues should be subject to a rigorous credit worthiness assessment, and information provided by the customer should be treated with caution when carrying out this assessment.

Practical Guidance:

Firms must make carefully considered decisions about whether it is appropriate to lend to mentally incapacitated customers, considering all available information. Credit worthiness assessments should be conducted using verified customer information wherever possible.



CONC 2.10.20

Rule Summary:

Relates to the suitability threshold for mentally incapacitated customers.

Explanation:

Even if the firm believes that a mentally incapacitated customer can afford the proposed contract, they should not provide credit unless they also believe the contract is suitable.

Practical Guidance:

Firms must carry out comprehensive assessments of whether proposed contracts are suitable for the customer.



(Except where stated, the term ‘communication’ in the analysis of Chapter 3 includes financial promotions)

CONC 3.1 Application

CONC 3.1.1

Rule Summary:

A purely legal statement.



CONC 3.1.2

Rule Summary:

Clarifies firms’ responsibility for appointed representatives.

Explanation:

An authorised firm with appointed representatives (ARs) should be used to the idea that they will be held accountable for any failings in the ARs activities, and this extends to communications issued by the AR.

Practical Guidance:

Firms with ARs must have a robust system in place for checking and approving any communication an AR intends to use before it is issued.



CONC 3.1.3

Rule Summary:

Clarifies the scope of Chapter 3.

Explanation:

Chapter 3, which relates to a firm’s communications with customers, applies to communications concerning credit agreements, credit broking and operation of an electronic system in relation to lending activities (such as peer-to-peer lending firms).

Practical Guidance:

Firms should ensure they are totally clear which communications the provisions of Chapter 3 apply to.



CONC 3.1.4 & CONC 3.1.5

Rule Summary:

Clarifies the scope of Principle 7.

Explanation:

The FCA require that all communications with customers are clear, fair and not misleading. This includes communications which relate to debt counselling, debt adjusting, consumer hire and credit information services.

Practical Guidance:

Firms should ensure that all information provided to customers is as clear and unambiguous as possible, and complies with the detailed rules regarding their content and form.



CONC 3.1.6

Rule Summary:

Clarifies some exemptions to Chapter 3.





Explanation:

Chapter 3 does not apply to business lending. So if a credit agreement, hire agreement or peer-to-peer agreement is solely for a customer’s business, then these rules on communications do not apply.

Examples of ‘excluded communications’ include communications from outside the UK, personalised illustrations provided to customers and one-off cold calls that are not part of an organised marketing campaign.

Chapter 3 also does not apply to ‘qualifying credit’. In this case the communications rules in the Mortgage Conduct of Business (MCOBS) sourcebook will apply instead. Qualifying credit is any secured loan offered by a company which arranges regulated mortgage contracts. So essentially, any communications for second charge secured loans issued by companies who also sell residential first charge mortgages will be covered by the MCOBS communications rules and not those in CONC. However, a credit firm that arranges second charge secured loans but not residential first charge mortgages will be subject to the CONC communications rules. And a firm that arranges first charge mortgages and offers a wide range of other credit products will be subject to the MCOBS rules for their secured lending and the CONC rules for their unsecured lending.

Practical Guidance:

Firms must be aware of when the provisions of Chapter 3 apply and when they do not. In particular, firms must be clear about when MCOBS applies and when CONC applies.



CONC 3.1.7 & CONC 3.1.8

Rule Summary:

Sets out limitations to the detailed communications rules for more basic types of communication.

Explanation:

A communication that contains only a firm’s name, its logo, contact details and a brief factual description of its business is exempt from many of the requirements of the chapter on financial promotions.

Practical Guidance:

Firms who send basic communications of this type must still ensure that they comply with the applicable rules in Chapter 3.3 and Chapter 3.5, which we shall look at later. See also 3.3.3 below about how a name or logo could give a false or misleading impression of the firm.



CONC 3.1.9

Rule Summary:

Clarifies the geographical issues concerning Chapter 3.

Explanation:

Chapter 3 applies to communications to persons located in the UK; to real time promotions (telephone, face to face etc) carried out in the UK, or for business activities carried out in some form in the UK; and to electronic communications made within the European Economic Area. The provisions of Chapter 3 apply if any of these criteria are met, even if the credit agreement is subject to the law of a country other than the UK.

Practical Guidance:

Firms should ensure they are clear as to whether their promotion is bound by the rules.



CONC 3.2 Financial promotion general guidance

CONC 3.2.1

Rule Summary:

Clarifies applicable legislation.

Explanation:

The Financial Services and Markets Act 2000 includes restrictions on promotions by unauthorised firms, and some of these restrictions apply here. Section 21 (1) says that an unauthorised person or firm may not communicate a financial promotion unless its content has been approved by an authorised firm or person.

Practical Guidance:

Firms who use unauthorised agents, such as introducers, should be aware of this restriction.



CONC 3.2.2

Rule Summary:

Confirms relevant legislation in the area of promotional activities.

Explanation:

Unsolicited calls, texts, faxes and emails are subject to the provisions of the Privacy and Electronic Communications (EC Directive) Regulations 2003.

Practical Guidance:

Firms should ensure they are aware of the content of these Regulations.



CONC 3.3 The clear fair and not misleading rule and general requirements

CONC 3.3.1

Rule Summary:

States the basic requirement for any communication.

Explanation:

All communications must be clear, fair and not misleading.

Practical Guidance:

Firms should review communications before they are issued to ensure they adhere to this principle.



CONC 3.3.2

Rule Summary:

Covers some general requirements for promotions.

Explanation:

Communications must use plain English, be legible and state the name of the firm making the communication (or the name of the firm on whose behalf it is made should a regulated firm use a third party for its communications). For a credit broking communication, the name of the lender should be stated, where this is known

Practical Guidance:

Firms should review communications before they are issued to ensure they adhere to these rules



CONC 3.3.3

Rule Summary:

Concerns one specific misleading idea that may be conveyed by a credit communication.

Explanation:

Communications must not state or imply that credit is available to all applicants regardless of their status and personal circumstances.

Practical Guidance:

Firms should review communications before they are issued to ensure they adhere to this rule. All staff should be made aware that they should not give any customer the impression that they will definitely receive credit until they have been approved.



CONC 3.3.4

Rule Summary:

Clarifies how firms might give a misleading impression of the type referred to in CONC 3.3.3 by use of their name, logo or internet address.

Explanation:

It may not just be the content of a communication which might suggest that credit is definitely available to all applicants. A firm must also not use a name, trading name, logo or internet address which states or implies this, so trading as Loans For All or similar would breach this rule.

Customers are sometimes told that their applications have been ‘pre-approved’. A customer should only be told this if all checks regarding their credit status have been completed. Checks must also have been carried out by the lender (or peer-to-peer lending firm), not by a broker or other firm.

Practical Guidance:

Firms must check that their name, trading name, logo or internet address does not give a false impression of this kind. Firms, especially brokers, must also take care not to inform customers they have been pre-approved until all the conditions for this have been satisfied.



CONC 3.3.5

Rule Summary:

Gives more details on what clear, fair and not misleading means.

Explanation:

Clear, fair and not misleading means that communications:

  • Are identifiable as communications or financial promotions from a particular firm (Some firms have for example been censured for sending communications that appear to be from friends of the recipient).

  • Are accurate

  • Give a balanced view of the advantages and disadvantages/risks of the relevant course of action

  • Are likely to be understood by the average member of the group at whom they are directed

  • Do not disguise, obscure or draw attention away from important information, statements and warnings. (Some recent promotions, whilst stating the Annual Percentage Rate as required, have not displayed it sufficiently prominently, or have suggested in some way that the rate is less relevant than other information).

Practical Guidance:

Firms should review communications before they are issued to ensure they adhere to these rules.



CONC 3.3.6

Rule Summary:

Relates to the way a firm describes its regulatory status on a communication.

Explanation:

A firm can name the FCA as its regulator on a communication. If it is regulated by the Prudential Regulation Authority (PRA) then this can also be stated. However, if a firm also carries out activities not regulated by these bodies, and a communication concerns these non-regulated activities in any way, then the communication must make clear which are regulated by the FCA/PRA and which are not. For example, a regulated mortgage broker advertising their buy to let offering would need to state that buy to let mortgages are not regulated by the FCA (correct as of June 2015).



Practical Guidance:

Firms who carry out both FCA regulated and non-regulated activities must ensure their communications make it clear which activities are covered by the FCA and which are not.



CONC 3.3.7

Rule Summary:

Relates to disclosure of material facts.

Explanation:

Leaving out certain information from a communication may be unfair, or may result in the communication being misleading.

Practical Guidance:

Firms need to consider what information they need to disclose in a communication, and should not leave information out with the aim of misleading the customer or providing them with an incomplete picture.



CONC 3.3.8

Rule Summary:

Relates to product comparisons made in communications.

Explanation:

If a communication compares one product with another product, whether or not that other product is also provided by the firm, then the comparison must be fair and balanced, and ideally compare like with like.

Practical Guidance:

Firms should ensure all comparisons made in communications are fair and balanced, and that any claims made about one product in relation to another can be substantiated.

CONC 3.3.9

Rule Summary:

Relates to requirements for premium rate phone numbers.

Explanation:

If a communication invites people to call the firm on a premium rate phone number, then the communication should also state the price per minute, the expected duration of the call and the expected total cost.

Practical Guidance:

Firms who make use of premium rate phone numbers must ensure that they disclose all necessary information about the likely cost.

CONC 3.3.10

Rule Summary:

Examples of what would constitute unclear, unfair or misleading communications.

Explanation:

The following are all practices which are likely to result in unclear, unfair or misleading communications:

  • Stating or suggesting that the firm is a lender, when they are not

  • Making misleading statements regarding the availability of credit

  • Not disclosing, or mis-representing, the firm’s name

  • Using false testimonials and references

  • Making false statements or allowing false implications to be made about a firm’s size or standing

  • Suggesting that a firm can clear a customer’s debt within a specified time frame, or suggesting that clearing debts is a simple process

  • Using an online tool, such as a budget planner, which fails to fully assess a client’s financial situation; or which does not include a risk warning that the results provided by the tool depend on accurate information being entered

  • Emphasising the reduction in monthly payments from a debt solution without also making clear that total repayments and/or the time taken to repay the debt may increase; without stating that the customer’s credit rating may be adversely affected; and without stating that lenders are not obliged to accept a reduced payment and are not obliged to freeze interest or charges



Practical Guidance:

Firms should check their communications before they are issued to ensure that none of these practices are being followed.

CONC 3.3.11

Rule Summary:

Relates to making misleading introductions.

Explanation:

It is unfair to state or suggest that a firm will introduce a customer to a provider of standard personal loans, credit cards or overdrafts, when they are in fact referring them to a high cost lender, such as a payday lender.

Practical Guidance:

Firms who effect introductions must be totally transparent as to the type of lender they are referring the customer to.

CONC 3.4 Risk warning for high-cost short-term credit

CONC 3.4.1

Rule Summary:

Relates to the required risk warning for high cost short term credit.

Explanation:

Communications relating to high cost short term credit, which includes payday loans, must prominently include the full risk warning as documented in this section. This warning is required on all communications for this type of credit.

Practical Guidance:

Lenders and brokers who offer these types of loans must ensure the required warning appears in full on all of their communications, and is given sufficient prominence.

CONC 3.4.2

Rule Summary:

Relates to use of the Money Advice Service logo.

Explanation:

The Money Advice Service (MAS) logo can be used as an alternative to its website address when complying with CONC 3.4.1. The MAS logo should not be used for any purposes for which firms have not been given specific permission to use it.

Practical Guidance:

Firms should ensure that the risk warning includes either the MAS website address or logo, and that they do not use the MAS logo on other communications.

CONC 3.5 Financial promotions about credit agreements not secured on land

CONC 3.5.1

Rule Summary:

Clarifies the scope of chapter 3.5.

Explanation:

Section 3.5 applies to both lenders and brokers who issue promotions regarding unsecured consumer credit agreements.

Practical Guidance:

All firms who this section applies to must familiarise themselves with its content.

CONC 3.5.2

Rule Summary:

Relates to being able to provide the service specified in a promotion.

Explanation:

A firm must not issue a promotion regarding credit which relates to the supply of goods and services, if at the time of issue, the firm and/or its suppliers are not prepared to provide the goods and services.

Practical Guidance:

Firms should ensure they only issue promotions for products or services they are prepared to provide at the time.

CONC 3.5.3

Rule Summary:

Sets out when certain information is required to be disclosed in a promotion, and when it is not required.

Explanation:

Whenever a promotion contains information about the cost of the credit being offered, whether in monetary or percentage terms, certain other cost information needs to be given, which we shall look at further in the analysis of CONC 3.5.5 below. Simply stating the representative APR – the APR expected to apply to at least 51% of credit agreements entered into – however does not by itself trigger a requirement to disclose other financial information.

The postal address of the firm must be stated on a promotion unless it is a television or radio advertisement, or it is a non-written promotion which is delivered at the firm’s premises, or it gives the name and address of any credit broker or dealer who will arrange the sale of any credit.

Practical Guidance:

Firms must ensure they understand when detailed cost information needs to be provided on their promotions.

CONC 3.5.4

Rule Summary:

Clarifies the meaning of a rate of interest for the purposes of chapter 3.5.

Explanation:

The definition of a rate of interest used in CONC 3.5.3 includes daily, monthly or annual rates. Stating that an agreement will have 0% interest is also regarded as stating a rate of interest for the purposes of CONC 3.5.3. Referring to interest rates might require additional information to be disclosed as per CONC 3.5.5 below.

Practical Guidance:

Firms should ensure that additional information is given as required whenever interest rates are disclosed on a promotion



CONC 3.5.5

Rule Summary:

Sets out the required cost information.

Explanation:

Whenever interest rate or cost information is included within a promotion, other than simply stating the representative APR, all of the following information also needs to be included:

  • The interest rate, and whether it is fixed or variable

  • The amounts of any other charges

  • The total amount of credit being provided

  • The representative APR (unless it is an authorised overdraft facility being offered to retail customers)

  • If the credit involves a deferred payment, the cash price and the amount of any advance payment required

  • The duration of the credit agreement (unless it is open-ended)

  • The total amount repayable over the term of the agreement

  • The amount repayable in each individual repayment

Where these amounts can vary over the term of the agreement, the figures stated must be those that the firm reasonably expects to apply at the time it issues the promotion.

If the agreement allows for different methods of drawdown to be used, for which different interest rates apply, then the promotion must state the highest interest rate that applies to the most frequently used drawdown method.

All the information required by CONC 3.5.5 must be presented in a clear and concise way. The information must be accompanied by the words ‘representative example’, indeed when that phrase is used it will always mean disclosure of information of this type. All of the information detailed in the above bullet points must be given equal prominence in the promotion, and if the firm decides to disclose other cost information, or mention an incentive to take out credit, such information should be given lower prominence than the required information detailed above.



Practical Guidance:

Firms need to be clear about when a representative example is required, and when it is needed, they need to ensure that all required information is disclosed.



CONC 3.5.6

Rule Summary:

Provides more guidance on the content of representative examples.

Explanation:

If as a result of entering into the advertised credit agreement, it would be expected that a customer would also enter into other forms of credit agreement, the required information in CONC 3.5.5 must also be disclosed for these other forms of credit.

The interest rate stated should be the effective annual interest rate if compound interest is a feature of the advertised credit agreement.

If any of the stated interest rates apply only for a fixed period, then the length of this period and the rate that will apply after that time need to be stated.

When promotions refer to charges, it should be clear what the nature of that charge is. If the amount of the charge is an estimate, this should also be made clear.

The ‘total amount of credit’ is the sum which is advanced to the customer for their own use, and does not include any fees or charges.

Practical Guidance:

Firms should familiarise themselves with the definitions of terms used in this chapter.



CONC 3.5.7

Rule Summary:

Gives details of other circumstances in which a representative APR needs to be disclosed.

Explanation:

In addition to when other cost information is provided, as covered in CONC 3.5.5, the representative APR is also required if the promotion:

  • States or implies that credit is available to customers whose access to credit might be restricted.

  • States or implies that credit is available on more favourable terms than with other providers.

  • Provides any sort of incentive to enter into the credit agreement. This includes both discounts and gifts and any statements or implications about the speed or convenience of the application process. The APR must be given greater prominence than any mention of an incentive of this type.

These rules about the APR do not apply to authorised overdrafts provided to retail customers.

Practical Guidance:

Firms should note the additional ways in which a requirement to disclose the representative APR is triggered. Payday lenders frequently emphasise the speed and convenience of their service, so these firms in particular need to note that the representative APR needs to ben given greater prominence than any information of this nature.



CONC 3.5.8

Rule Summary:

Clarifies what an incentive to apply for credit might be.

Explanation:

This relates specifically to the ‘speed or convenience’ type of incentive referred to in CONC 3.5.7 above. Statements on promotions of this nature are to be regarded as incentives if they would be likely to influence or persuade customers to apply for credit.

Practical Guidance:

If in doubt as to whether any statement constitutes an incentive, firms should disclose the representative APR.



CONC 3.5.9

Rule Summary:

Clarifies some wording to be used when stating an APR.

Explanation:

An APR must be accompanied by the percentage symbol, i.e. ‘x%APR’, together with a statement that it is variable, if this applies. The representative APR must be accompanied by the word ‘representative’.

Practical Guidance:

Firms should ensure that these requirements are met in their promotional material.



CONC 3.5.10

Rule Summary:

Relates to ancillary services on credit agreements.

Explanation:

Consider if the promotion is for any form of credit which requires the customer to enter into any other form of financial service (an ancillary service), or where the provision of the ancillary service would enhance the terms on which credit was offered. If either of these circumstances apply, and the cost of this additional service cannot be determined in advance, then it must be made clear in the promotion either that the ancillary service is compulsory, or that it would enhance the terms on which credit was provided.

This information must be provided alongside the representative APR, and given the same prominence as the content of a representative example as detailed in CONC 3.5.5.

This rule does not apply to authorised overdrafts provided to retail customers.

Practical Guidance:

Firms offering ancillary services of this nature should ensure their promotions are totally clear and unambiguous in this respect.



CONC 3.5.11

Rule Summary:

Relates to the provision of security for a loan.

Explanation:

Although chapter 3.5 relates to loans that are not secured on land, at times some other form of security may be required. If this is the case, the promotion should state this, and should confirm the type of asset required as security.

Practical Guidance:

Firms who offer loans secured on assets other than land or property should ensure their promotions comply with this rule.



CONC 3.5.12

Rule Summary:

Defines some of the terms used in this chapter, and when they can and cannot be used on promotional material.

Explanation:

Overdraft’ should only be used for a facility that allows a customer to draw more funds than the level of their balance on a current account.

Interest free’, or similar expressions, should only be used when a customer will not need to pay any more for an item than they would have done had they purchased it with a one-off cash payment.

Unless no advance payments of any kind are required, the term ‘no deposit’ or similar must not be used.

Loan guaranteed’, ‘pre-approved’, ‘no credit checks’ or any other equivalent expression must not be used if the agreement is subject to the customer’s credit status in any way.

Gift’, ‘present’ or similar must not be used if there is any requirement for the customer to repay credit or to return an item at a later date.

Promotions must not give a weekly equivalent payment unless weekly payments are actually permitted under the terms of the agreement.

Practical Guidance:

Firms using any of these expressions must take the utmost care to ensure they really are an appropriate description of their offering.



CONC 3.5.13

Rule Summary:

Clarifies some items relating to total charge for credit and APR.

Explanation:

If a credit limit applies to an overdraft type agreement, and the precise amount of this limit is not known at the time that the promotion is issued, but it is known that the limit will be less than £1,200, then it must be assumed that the limit will be £1,200.

If all required repayments under an agreement are equal except for one, and the amount of that one repayment is not significantly more or less than the others, then the APR can be calculated on the basis that all the repayments are at the same level as the normal repayment. The acceptable tolerance here is that the difference exhibited by the one payment must be no more in pence than the number of repayments due.

If an agreement requires more than three payments, all payments are to be made at equal intervals, and the time between the start of the credit agreement and the first payment is greater than the time between the payments, then a firm is entitled to calculate the APR as if the interval between the start date and the first payment is the same as the interval between the payments.

Practical Guidance:

Firms to whom these special circumstances might apply should ensure they know what are acceptable tolerances for quoting the APR and which are not



CONC 3.6 Financial promotions about credit agreements secured on land

CONC 3.6.1

Rule Summary:

Clarifies when chapter 3.6 applies.

Explanation:

Chapter 3.6 applies to financial promotions issued by both lenders and brokers concerning credit agreements secured on land. However, if the firm in question also conducts lending or broking activities with regard to regulated mortgage contracts, Chapter 3.6 does not apply, and firms should instead comply with the financial promotions rules in the FCA’s Mortgage Conduct Of Business (MCOB) sourcebook.

Practical Guidance:

Firms should ensure they are totally clear about when the provisions of chapter 3.6 apply, and when other Handbook sections might apply instead



CONC 3.6.2

Rule Summary:

Explains the definition of ‘relevant date’ used.

Explanation:

In most cases, the relevant date will be the date on which the credit agreement is drawn up. However, if the agreement specifies the first date on which the customer will be entitled to receive any monies or anything else under the agreement, then this date will be the relevant date.

Practical Guidance:

Firms should understand what the relevant date for any particular agreement is.



CONC 3.6.3

Rule Summary:

Relates to being able to provide the service specified in a promotion.

Explanation:

A firm must not issue a promotion regarding credit which relates to the supply of goods and services, if at the time of issue, the firm and/or its suppliers are not prepared to provide the goods and services in exchange for cash.

Practical Guidance:

Firms should ensure they only issue promotions for services they are prepared to provide at the time.

CONC 3.6.4

Rule Summary:

Explains how including certain financial information in a financial promotion triggers the need for additional information to be disclosed.

Explanation:

If a promotion contains any information about the frequency, number or amount of repayments required; or information about other payments and charges; or states the total amount repayable under the credit agreement, then the promotion must also include:

  • Details of the amount of money to be lent under the credit agreement, or the minimum and maximum amounts that could be lent if the exact amount is not known

  • Details of any requirement to make a deposit of money in connection with the credit agreement

  • The cash price of any goods or services to be provided under the agreement

  • Whether an advance payment is required, and how much this payment would be, expressed as a monetary amount or a percentage. If the amount of the advance payment is not known, then the minimum amount should be stated

  • The postal address of the firm making the promotion, unless the promotion is a television or radio advertisement, or it is delivered in a non-written form on the firm’s premises, or the address of a dealer or broker who would be involved in the process were an application to be made is given instead

All of this information must be given equal prominence.

Practical Guidance:

Firms should be aware of what information triggers the need to disclose further information, and of what this further information is.

CONC 3.6.5

Rule Summary:

Details some risk warnings required on secured credit promotions.

Explanation:

The promotion must state that security is required, or may be required, for the loan, and should state the nature of the security, i.e. land or property for the purposes of this chapter

If the credit agreement is such that no regular repayments are made during the term of the contract, such as in an equity release type contract; or the lender is not entitled to re-possess the land or property to enforce the agreement, then the following risk warning must appear on financial promotions: “CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN ANY DOUBT, SEEK INDEPENDENT ADVICE”.

Except in the above circumstances, all promotions for credit secured on land must contain the following risk warning: “YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT”

If the credit is effected to pay off debts held with other lenders (consolidation), then the following risk warning must also be included: “THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.”

If repayments are required under a credit agreement, secured on land or property, and repayments are required in a currency other than sterling, the following risk warning must also be included: “CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT”

All risk warnings must be given greater prominence in the promotion than any information about charges, other than the APR; and must also have greater prominence than any incentive that the promotion contains to enter into a credit agreement. The risk warning must also be no less prominent than any other financial information in the promotion.

The need for the risk warnings does not apply if the promotion:

  • Is made in a television or radio programme, of which the primary purpose is not to promote financial products (note therefore that they are required in television or radio advertisements)

  • Is communicated via a film which is not a television broadcast

  • Contains only the name of the firm

Practical Guidance:

Firms must understand when each of the risk warnings are needed, and use the correct wording for each warning and give them sufficient prominence within the promotion.

CONC 3.6.6

Rule Summary:

Explains when the APR needs to be disclosed on a secured credit agreement, and sets out some rules as to how it should be presented.

Explanation:

The typical APR must be quoted on a promotion if the promotion contains any of the following:

  • Other information about prices and/or interest rates

  • Information about the frequency or number of repayments required

  • An incentive to enter into the credit agreement – this includes any indications that the application process might be quick, easy or convenient

  • An indication that credit may be available to applicants who have had difficulty obtaining credit elsewhere

  • An indication that credit might be available on more favourable terms than with other lenders



If a range of possible APRs applies, the promotion must state both the highest APR which is likely to apply to credit agreements covered by the promotion, and the APR which represents the lowest figure likely to apply to at least 10% of the credit agreements. Both figures must be stated with equal prominence.

The APR figure must be accompanied by the percentage symbol, i.e. ‘x% APR’

Where the APR may vary, the word ‘variable’ should be included, i.e. ‘x% APR variable’

When quoting a typical APR the word ‘typical’ must accompany the rate quoted. The typical APR is the rate at or below which the firm reasonably expects at least 66% of the agreements that would be entered into as a result of the promotion.

If any other financial information of any type is included in the promotion, the typical APR must be stated alongside this information. The typical APR must be given greater prominence than any of this other financial information, and greater prominence than any incentive included in the promotion. For electronic promotions, the rules specifically require the typical APR to be stated in text that is at least 1.5 times the size of the other information.

If the promotion is for an overdraft facility on a current account, then the APR does not need to be stated, provided that the interest rate and any charges included in the total charge for credit are stated.

Practical Guidance:

Firms distributing secured credit promotions must ensure they are aware of the circumstances in which the need to state the APR is triggered, and the rules which apply to quoting the APR.



CONC 3.6.7

Rule Summary:

Clarifies what an incentive to apply for credit might be.

Explanation:

This relates specifically to the ‘speed or convenience’ type of incentive referred to in CONC 3.6.6 above. Statements on promotions of this nature are to be regarded as incentives if they would be likely to influence or persuade customers to apply for credit.

Practical Guidance:

If in doubt as to whether any statement constitutes an incentive, firms should disclose the APR.



CONC 3.6.8

Rule Summary:

Defines some of the terms used in this chapter, and when they can and cannot be used on promotional material

Explanation:

Overdraft’ should only be used for a facility that allows a customer to draw more funds than the level of their balance on a current account.

Interest free’, or similar expressions, should only be used when a customer will not need to pay any more for an item than they would have done had they purchased it with a one-off cash payment.

Unless no advance payments of any kind are required, the term ‘no deposit’ or similar must not be used.

Loan guaranteed’, ‘pre-approved’, ‘no credit checks’ or any other equivalent expression must not be used if the agreement is subject to the customer’s credit status in any way.

Gift’, ‘present’ or similar must not be used if there is any requirement for the customer to repay credit or to return an item at a later date.

Promotions must not give a weekly equivalent payment unless weekly payments are actually permitted under the terms of the agreement.

Practical Guidance:

Firms using any of these expressions must take the utmost care to ensure they really are an appropriate description of their offering.



CONC 3.6.9

Rule Summary:

Clarifies some items relating to total charge for credit and APR on secured running credit agreements.

Explanation:

This section applies to running-account credit, where a customer is allowed to receive cash, goods or services up to a defined credit limit.

When calculating the APR and/or the total charge for credit, firms must assume that the credit limit is £1,500 if the actual limit is anything equal to or above that figure. If the credit limit is below £1,500, the actual credit limit amount should be used.

It must be assumed also that the credit is provided for a 12 month period, and that it is provided in full at the outset.

If the interest rate will change at any point during the first three years of the agreement, the interest rate used must be the highest that will apply during that period.

The rate of interest relating to the provision of credit to purchase goods, services or land must be used, if this plays any part in the credit arrangement, even if the credit agreement also includes credit for any other purpose.

It must be assumed that the credit will be repaid in 12 equal monthly instalments.

If all required repayments under an agreement are equal except for one, and the amount of that one repayment is not significantly more or less than the others, then the APR and total charge for credit can be calculated on the basis that all the repayments are at the same level as the normal repayment. The acceptable tolerance here is that the difference exhibited by the one payment must be no more in pence than the number of repayments due.

If an agreement requires more than three payments, and all payments are to be made at equal intervals, and the time between the start of the credit agreement and the first payment is greater than the time between the payments, then a firm is entitled to calculate the APR and total charge for credit as if the interval between the start date and the first payment is the same as the interval between the payments.

Practical Guidance:

Firms should familiarise themselves with how the APR and the total charge for credit might be calculated





CONC 3.6.10

Rule Summary:

Lists the information which might require the APR to be disclosed

Explanation:

The APR needs to be disclosed if any price or interest rate information, or any details of the number or frequency of the required payments, appear in the promotion.

If any of the following appears in the promotion, the APR must be displayed with greater prominence than the other information:

  • Any price or interest rate information, or any details of the number or frequency of the required payments

  • A statement of the need to make a deposit in connection with the credit agreement, if applicable

  • A statement as to whether an advance payment is required

Practical Guidance:

Firms should ensure they are totally clear about when the requirement to disclose the APR applies, and when it needs to be given greater prominence



CONC 3.7 Financial promotions and communications: credit brokers

CONC 3.7.1 & CONC 3.7.2

Rule Summary:

Clarifies when chapter 3.7 applies.

Explanation:

Chapter 3.7 applies to communications and promotions carried out by credit brokers regarding credit agreements .

Practical Guidance:

All credit brokers need to be aware of the rules in this section, regardless of the type of credit they are involved with. They should also note that the provisions of chapters 3.5 and 3.6 also apply to them – this section is simply concerned with the rules that apply specifically to brokers.



CONC 3.7.3

Rule Summary:

Relates to a broker’s obligation to disclose how many lenders they have access to.



Explanation:

A communication should make clear how many lenders they can offer products from. For example, a broker might offer credit agreements from just one lender, or from a panel of selected lenders, or from all lenders in the marketplace who offer a particular form of credit.

Practical Guidance:

Brokers should ensure they make it clear how many lenders they can potentially deal with.



CONC 3.7.4

Rule Summary:

Lists some key issues relating to the content of brokers’ promotions.

Explanation:

Firms must describe the services they offer in terms that should be easily understood by an average member of the public.

If the broker has any close links or agreements with one or more lenders that might have an impact on their ability to offer unbiased advice as to which provider is best, then specific details of this potential conflict should be communicated to the customer.

A credit broker wishing to describe themselves as ‘independent’ must be willing to consider a range of lenders that is large enough to represent a fair representation of the market. A broker whose ability to do this is restricted by having one or more agreements in place with lenders should not describe themselves as independent.

When describing the extent to which their services are independent, brokers must display this information in their communications prominently. The description must also be clear and easily understood.

Practical Guidance:

Brokers must be totally transparent with their customers as to what extent their services and advice is independent and unbiased



CONC 3.7.5 & CONC 3.7.6

Rule Summary:

Relates to the need to use the firm’s legal name.

Explanation:

A broker must ensure that communications and promotions use their firm’s legal name, as it appears in the Financial Services Register. They must not simply use a trading name without also giving the legal name.

Practical Guidance:

Firms must ensure that their legal name is displayed.

CONC 3.7.7 & CONC 3.7.8

Rule Summary:

Relates to brokers making clear that they are not lenders.

Explanation:

Brokers’ promotions must clearly state that the firm is a broker and not a lender. If the firm carries out both activities, but the promotion relates solely to its broking activities, promotion must state clearly that only its broking services are being promoted. For the statement to be prominent, it must be the case that the average person to whom the promotion is directed would be aware of the statement’s presence.

Practical Guidance:

Firms must ensure that all their promotions adhere to this rule.



CONC 3.8 Financial promotions and communications: lenders

CONC 3.8.1

Rule Summary:

Clarifies when chapter 3.8 applies.

Explanation:

Chapter 3.8 applies whenever a lender communicates a communication or promotion about lending of regulated consumer credit.

Practical Guidance:

All lenders need to be aware of the rules in this section, regardless of the type of credit they are involved with. They should also note that the provisions of chapters 3.5 and 3.6 also apply to them – this section is simply concerned with the rules that apply specifically to lenders.



CONC 3.8.2

Rule Summary:

Lists some examples of practices considered unfair in credit communications.

Explanation:

Lenders must not inform customers they can have a pre-determined amount of credit unless they have carried out a credit assessment on that customer, or an assessment of the impact the obligations under the agreement would have on the customer’s financial situation.

Lenders must not state or imply that the provision of secured credit is solely dependent on the value of the security offered.

Lenders must not promote credit to a customer for whom it knows or suspects that the credit in question would be unsuitable.

Practical Guidance:

Lenders must ensure their communications and promotions do not meet any of these criteria for being considered unfair.



CONC 3.8.3

Rule Summary:

Provides clarification as to what might constitute unsuitable credit in CONC 3.8.2.

Explanation:

Lenders must not encourage or advise a customer to take out secured credit when it is not in their interests to do so. This includes taking out secured borrowing to pay off unsecured borrowing.

Lenders must not promote high cost short-term credit products as being suitable for longer term borrowing.

Practical Guidance:

Lenders must ensure they refrain from doing either of these unfair practices.



CONC 3.8.4

Rule Summary:

Clarifies one key issue in relation to suitability assessments

Explanation:

Assessing whether a particular credit agreement is suitable for a customer is not the same as assessing whether any form of credit is suitable for them

Practical Guidance:

Lenders must ensure they do not confuse these two distinct things





CONC 3.9 Financial promotions and communications: debt counsellors and debt adjusters

CONC 3.9.1

Rule Summary:

Clarifies when chapter 3.9 applies





Explanation:

Chapter 3.9 applies whenever a debt counsellor or debt adjuster communicates a communication or promotion about regulated consumer credit.

Practical Guidance:

All relevant firms need to be aware of the rules in this section, regardless of the type of credit they are involved with. They should also note that the provisions of chapters 3.5 and 3.6 also apply to them – this section is simply concerned with the rules that apply specifically to counsellors and adjusters.



CONC 3.9.2

Rule Summary:

Re-iterates a key concept regarding communications, and gives a specific example of an inappropriate medium for debt counselling communications.

Explanation:

The requirement for communications to be clear, fair and not misleading applies to communications made by debt counsellors and adjusters.

Debt counsellors should not use methods where space is limited to promote their offering. This is likely to include some aspects of social media, where a maximum length applies to items posted.

Practical Guidance:

Firms should ensure their communications are clear, fair and not misleading; and that they do not use any medium where there is a restriction on the available space to promote their offering.



CONC 3.9.3

Rule Summary:

A detailed list of rules to be followed in debt counselling and adjusting communications.

Explanation:

Unless the same information has already been provided in a previous communication to the same customer, a communication must contain the following:

  • A clear statement of the range of services the firm can offer

  • Details of any relationships with other parties which are relevant to the services described in the communication

  • The fees to be charged, how these have been calculated and what services are provided in exchange. If the exact fees are not known, a reasonable estimate should be given

  • Whether any of the firm’s services require payment of an additional fee and/or are provided by another party

  • That complaints about the firm may be referred to the Financial Ombudsman Service, and details of how the customer can access the firm’s complaints procedures

  • That the firm provides a for-profit service (unless of course the firm is a not-for-profit debt counsellor or adjuster)

  • That the firm’s services are provided in return for payment of a fee by the customer

  • A reference to the fact that debt advice is available from not-for-profit bodies (unless of course the firm is itself a not-for-profit debt counsellor or adjuster)

  • If the communication makes reference to one or more options the customer has for resolving their debt issues, then the key advantages, disadvantages and risks of these options must be included

  • Details of any adverse impact the communicated debt solution might have on the customer’s credit rating

  • A statement to the effect that entering into an individual voluntary arrangement (IVA), a debt relief order or a protected trust deed will mean that the customer will appear on a public register as having done so

  • Where applicable, that a particular debt solution is only available in some parts of the UK, e.g. only in England and Wales or only in Scotland

  • If a particular debt solution would involve the counsellor/adjuster retaining all or part of the payments received from the customer for a certain period, then warnings are required about the fact that the debt solution could mean a customer falls into arrears, or could increase a customer’s arrears. Details of when the counsellor/adjuster will distribute the payments to lenders should also be given.

  • If the communication concerns an IVA or protected trust deed, then the communication needs to warn that: bankruptcy may result if the debt solution fails, homeowners may need to release equity from their homes to reduce their debts, re-mortgages may be more expensive, IVAs can be extended for 12 months if the re-mortgage option is not viable, entering into an IVA or trust deed will restrict the customer’s expenditure, lenders are not obliged to agree to an IVA or trust deed, and only unsecured debts included within the IVA or trust deed will be discharged at the end of the arrangement

  • Where another option other than the one being communicated is available for resolving a customer’s debt issues, a statement must be made to the effect that one or more other options are available, and that these options may be suitable

Practical Guidance:

This is a very lengthy list and counsellors and adjusters must take great care to ensure that all of these are covered in their communications.



CONC 3.9.4

Rule Summary:

Clarifies the requirement to provide information about sources of free debt advice in CONC 3.9.3.

Explanation:

Communications must make customers aware of the existence of free debt advice publications from the Insolvency Service (in England and Wales), the Department of Enterprise, Trade and Investment (in Northern Ireland) or the debt advice published by the Scottish Government (in Scotland).

Practical Guidance:

Firms must ensure that their communications refer to the availability of publications from these bodies, and that all relevant bodies are mentioned, so if the communication is distributed throughout the UK, the English, Northern Irish and Scottish bodies must all be mentioned.



CONC 3.9.5

Rule Summary:

Gives examples of unfair practices when effecting counselling/adjusting communications.

Explanation:

Communications must refrain from any of the following:

  • Stating or suggesting that the firm operates on a not-for-profit basis when it does not

  • Stating or suggesting that the firm is a charity or government body when it is not, or stating or suggesting that it represents a charity or government body when it does not

  • Promoting a claims management service as a method of resolving debt issues

  • Stating or suggesting that the firm’s negotiations with creditors on the customer’s behalf are guaranteed to produce a successful outcome

  • Unfairly asking a customer to call a premium rate phone number

Practical Guidance:

Hopefully no reputable firm would engage in any of these practices, but firms should note that carrying out any one of these actions is definitely considered to be unfair.



CONC 3.9.6

Rule Summary:

Gives an example of unfair use of a premium rate phone number.

Explanation:

It is unfair to give a premium rate phone number as the contact number for customers wishing to make a complaint.

Practical Guidance:

Firms should ensure that where customers are given a telephone number on which to make complaints, that this a freephone or standard rate number.



CONC 3.9.7

Rule Summary:

Relates to the way firms represent their services in online communications.

Explanation:

A firm’s website must not state, imply or be designed in such a way that users might be led to believe that a commercial firm offers a charitable service, a not-for-profit service or a government-backed service.

Firms must also not manipulate internet search tools and search engines in such a way that customers seeking charitable, not-for-profit or government-backed debt advice might be directed to their site.

Practical Guidance:

Firms must ensure they do not make any communication which might mislead a customer into thinking they are not a commercial entity.



CONC 3.10 Financial promotions not in writing

CONC 3.10.1

Rule Summary:

Clarifies to whom chapter 3.10 applies.

Explanation:

Chapter 3.10 applies to lenders, brokers, debt counsellors and adjusters and those who operate an online lending platform, such as a peer-to-peer lending company. The chapter applies to non-written promotions.

Practical Guidance:

Firms should consider whether this section applies to them or not.



CONC 3.10.2

Rule Summary:

States some rules for non-written communications provided away from the firm’s premises.

Explanation:

If the firm communicates a non-written promotion at any location other than the firm’s premises, it must be done at a reasonable time of the day. The firm must also identify themselves and give the name of their representative at the start of the promotion, and must make it clear to the recipient that they are engaging in promotional activity.

This might most commonly apply to visits to the customer’s home, which should not be made at unsocial hours. This is likely to mean late in the evening or very early in the morning in most cases, but if a firm knows that a customer would consider a daytime visit as unsocial – perhaps because they work night shifts – then it should also refrain from visiting at that time.

CONC 3.10.2 might also apply to street canvassing of potential customers, or to presentations delivered at locations other than the firm’s offices.

Practical Guidance:

When making any non-written promotion away from their premises, firms must ensure they meet all of the obligations in this section.



CONC 3.11 Not approving certain financial promotions

CONC 3.11.1

Rule Summary:

Clarifies to whom chapter 3.11 applies

Explanation:

Chapter 3.11 applies to lenders, brokers, debt counsellors and adjusters and those who operate an online lending platform, such as a peer to peer lending company. The chapter applies to non-written promotions.

Practical Guidance:

Firms should consider whether this section applies to them or not.



CONC 3.11.2

Rule Summary:

Explains the circumstances in which firms should not pre-approve their financial promotions.

Explanation:

The content of any promotion communicated via a telephone conversation, personal visit, other face-to-face conversation or other interactive dialogue (such as via an online chat facility) must not be approved in advance by the firm delivering it. This is because it is impossible to predict how the recipient will react during the dialogue, and how the firm’s representative will need to respond.

Practical Guidance:

Firms must not attempt to pre-approve an interactive financial promotion. However, they should have a robust system in place for approving all other financial promotions before they are communicated. If the firm lacks the resources and/or expertise to do this themselves, they should seek the assistance of a compliance consultant.





CONC 3.11.3

Rule Summary:

Clarifies that interactive communications can still be made.

Explanation:

The fact that firms should not pre-approve interactive communications does not mean that promotions of this nature cannot be delivered.

Practical Guidance:

Firms need to know they can make face-to-face or telephone promotions.



CONC 4.1 Content of quotations

CONC 4.1.1 & CONC 4.1.2

Rule Summary:

Clarifies which firms chapter 4.1 applies to.

Explanation:

All sections other than 4.1.4 apply to firms engaged in lending of consumer credit and hiring activities. Section 4.1.4 applies to credit broking.

Practical Guidance:

Firms should understand which areas of this chapter apply to them.



CONC 4.1.3 & CONC 4.1.4

Rule Summary:

Details statements and risk warnings a lender or broker must provide in a quotation.

Explanation:

A quotation provided by a lender, hirer or broker in respect of a regulated credit agreement must contain certain information:

  • A statement that the loan is, or may be, secured on a customer’s home, if this applies

  • If the loan is secured on the customer’s home, but no repayments are required (other than a repayment of rolled-up interest as a lump sum), and the lender cannot re-possess the property while the customer continues to occupy it, then the following risk warning must appear: “CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN DOUBT, SEEK INDEPENDENT ADVICE.”

  • If the loan is, or may be, secured against a customer’s home and the circumstances detailed above do not apply, then the following risk warning must appear: “YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.”

  • If a loan secured on land or property involves repayments in a currency other than sterling, the following risk warning must appear: “THE STERLING EQUIVALENT OF YOUR LIABILITY UNDER A FOREIGN CURRENCY MORTGAGE MAY BE INCREASED BY EXCHANGE RATE MOVEMENT.”

  • A statement that the hiring of goods under the agreement involves, or may involve, the customer’s home being provided as security, if this applies

  • If the customer’s home is, or may be, used as security in the above circumstances, the following risk warning must appear: “YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A HIRE AGREEMENT SECURED BY A MORTGAGE OR OTHER SECURITY ON YOUR HOME.”

Practical Guidance:

Lenders, hirers and brokers must ensure that they understand which statements and warnings are required in quotations, and then ensure that these statements and warnings are included.

CONC 4.1.5

Rule Summary:

Clarifies some terms used and gives additional requirements for the display of information on quotations.

Explanation:

For the purposes of chapter 4.1, a quotation is a document which gives information about the terms on which a lender is prepared to provide credit. However, the following documents should not be regarded as meeting the definition of a quotation:

  • A financial promotion

  • A document which relates to withdrawal from a prospective mortgage

  • A document which is intended to replace or partially replace the need for a full credit agreement or consumer hire agreement

  • A copy of an unexecuted credit agreement

Required statements in quotations, as listed in CONC 4.1.3 and 4.1.4, must be in capital letters, prominently displayed and easily readable.

Even if the information contained on it is only available temporarily, the document should be regarded as a quotation if it meets the definition of a quotation detailed above.

For Scottish firms, the terms ‘bailment’ and ‘hiring’ should be regarded as interchangeable. A reference to a mortgage or charge on land should be read as relating to the provision of a standard security of land for the loan.

Practical Guidance:

Firms should understand what a quotation is, and how information should be displayed on a quotation.







CONC 4.2 Pre-contract disclosure and adequate explanations

CONC 4.2.1

Rule Summary:

Explains when chapter 4.2 applies.

Explanation:

Chapter 4.2 applies to lenders, as well as to brokers who have responsibility for providing the necessary information to the customer. However, it does not apply where:

  • The loan is secured on land

  • The loan amount exceeds £60,260

  • The credit provided is an overdraft on a personal current account where repayment is not required on demand or within three months

Practical Guidance:

Firms should consider whether the credit they provide (or arrange as a broker) is covered by these specifications.



CONC 4.2.2

Rule Summary:

Adds a caveat to the exemptions in CONC 4.2.1.

Explanation:

Firms involved in the provision of credit that meets one or more of the three exemptions listed in CONC 4.2.1, i.e. secured loans, loans above £60,260 or overdrafts where payment is not required within three months, nevertheless need to consider whether it is appropriate to disclose any or all of the detailed information we shall look at later in CONC 4.2.5. In particular, firms should consider disclosing information relating to the consequences of missing repayments or repaying less than required, such as the risk of re-possession.

Practical Guidance:

Even if they are covered by one of the three apparent exemptions, firms still need to consider what level of information they should disclose to their customers, bearing in mind that the FCA has high-level principles which say that customers must be treated fairly and their information needs must be considered.



CONC 4.2.3

Rule Summary:

Explains the disclosure requirements, other than those in chapter 4, which apply to a credit agreement.



Explanation:

The FCA has taken over regulation of consumer credit, and has its own detailed rulebook. However, the Consumer Credit Act remains in force and its requirements still need to be complied with. Section 55 of the Act relates to explaining the key features of an agreement, including the risks; explaining the required repayments; and explaining the consequences of not paying.

If these disclosure requirements under section 55 are not met, then the credit agreement will only be enforceable if a court order to this effect is obtained.

Other disclosure requirements which must be complied with include those under the Financial Services (Distance Marketing) Regulations 2004, the Electronic Commerce (EC Directive) Regulations 2002, and the Consumer Protection from Unfair Trading Regulations 2008 and the Cancellation of Contracts made in the Consumer’s home etc Regulations 2008. In addition, reference is made to CONC 2.7, which relates to information that needs to be disclosed when carrying out distance marketing activities; and CONC 2.8, which relates to information that needs to be disclosed when carrying out e-commerce activities.

Practical Guidance:

Firms need to be aware of all the information that needs to be disclosed, not just that which appears in chapter 4.2



CONC 4.2.4

Rule Summary:

Explains that disclosure information may need to be tailored to information supplied by the customer.

Explanation:

Before disclosing any required information, firms should consider any information supplied by the customer, or any preferences expressed by the customer during their dealings with the firm, and consider whether the information disclosed needs to be tailored in any way as a result.

Practical Guidance:

Firms should consider whether any information provided by the customer during the process necessitates changing the way in which information is delivered.



CONC 4.2.5

Rule Summary:

Details the pre-contractual information that needs to be provided, and specifies other requirements as to how this information is delivered.

Explanation:

Where pre-contractual information is handed to the customer in person, they must be permitted to take that information away and consider it. The customer must be given the opportunity to ask questions about the agreement and be informed of how they can approach the firm for further assistance.

The required pre-contractual information, to be provided before a credit agreement is entered into, includes:

  • The required individual repayments, and where known, the total amount repayable over the term of the agreement

  • Any features of the agreement which make the credit unsuitable for particular uses

  • Any features of the agreement which could adversely affect the customer

  • Consequences of failing to make the required repayments, including charges for late payment, the impact on the customer’s credit rating and the implications for future credit applications, the possibility that legal action may be taken to recover the debt and the possibility of re-possession of the customer’s home or other security

  • Details of any right a customer has to withdraw from the agreement, together with information on when and how such a right should be exercised

The advice to the customer to consider this information, and the explanation of how they can seek further assistance, can generally be given either orally or in writing. However, if the information about unsuitable features, required payments and withdrawal rights is given either orally or distributed to the customer in person, then the information about features which could have an adverse effect, consequences of failing to make repayments and the advice to consider the disclosure information required under section 55 of the CCA must be given orally.

The disclosure requirements do not apply to a lender if a broker has disclosed all the required information to the customer in the correct way.

If the credit agreement is a pawnbroking arrangement, the disclosure requirements relating to the consequences of failing to pay and to withdrawal rights still apply, but those relating to required repayments, unsuitable features or features having an adverse effect do not. There is also no requirement to advise the customer to consider information provided under the section 55 disclosure requirements, and no obligation to advise the customer how to seek additional information from the firm. However, the requirement to give the customer the opportunity to ask questions about the agreement still applies.

CONC 4.2.5 does not apply to agreements entered into by a lender or broker outside their normal business activities. It also does not apply if the criteria for a small borrower-lender-supplier agreement are met.

Practical Guidance:

Firms must ensure they disclose all the required information, in the correct manner, before an agreement is concluded.



CONC 4.2.6

Rule Summary:

A qualification to the information disclosure requirements in CONC 4.2.5.

Explanation:

The explanations provided by the firm under the pre-contract disclosure requirements should be performed in such a way that the customer can make a reasonable assessment of whether they can afford the credit and of any risks involved.



Practical Guidance:

Firms should ensure their explanations are easily understandable and address all necessary issues. Again, firms are reminded of the need for all communications to be ‘clear, fair and not misleading’.



CONC 4.2.7

Rule Summary:

Lists some criteria for determining how a firm might go about giving the required pre-contractual information.

Explanation:

The extent of the explanations of the required pre-contractual information the firm gives might depend on:

  • The type of credit

  • The amount of credit being provided

  • The level of risk associated with the credit

  • The customer’s level of understanding of the explanations provided

  • The method by which the transaction takes place

Practical Guidance:

Firms should tailor their explanations to the circumstances of the sale and the customer’s level of knowledge.



CONC 4.2.8

Rule Summary:

Clarifies one consideration that is specifically relevant to payday lenders and similar firms.

Explanation:

In respect of payday lenders and other providers of high-cost short-term credit, the pre-contractual explanations must include an explanation of the fact that this type of lending is not suitable for longer term borrowing, and that it would be expensive for the customer were they to use this type of credit to borrow over the longer term.

Practical Guidance:

Firms to who this applies must ensure that they disclose this vital piece of information.





CONC 4.2.9

Rule Summary:

Relates to disclosing the required information when the customer indicates there is no need

Explanation:

Even if a customer states or implies that they are not concerned about receiving all of the required pre-contractual information, it must still be provided to them.

Practical Guidance:

Firms must ensure that the required information is provided to all customers.



CONC 4.2.10

Rule Summary:

Relates to not encouraging a customer to waive their rights to the required information

Explanation:

Firms must not encourage, or provide incentives for, customers to waive their rights to receive all of the pre-contractual information.

Practical Guidance:

Firms must provide the required information to all customers and not encourage them to forego their right to receive it.



CONC 4.2.11

Rule Summary:

Relates to the fact that a broker can provide the information, removing the need for the lender to do so.

Explanation:

Lenders whose customers are using brokers should still be alert to the possibility that they might need to provide the pre-contractual information. The disclosure requirements do not apply to a lender if a broker has disclosed all the required information to the customer in the correct way. However, lenders must take reasonable steps to ascertain if the broker has done this.

Practical Guidance:

Lenders must not automatically assume that a broker will provide all of the required information in every case.



CONC 4.2.12

Rule Summary:

Relates to practice to be followed when a customer requests additional information.





Explanation:

If a customer requests additional information or an explanation of the pre-contractual information, this should be provided to them swiftly and without any additional charge being levied, unless there is a good reason to require payment.

Practical Guidance:

Firms must ensure they comply with requests of this nature swiftly and without charging for the service



CONC 4.2.13

Rule Summary:

Relates to customers being asked to acknowledge information.

Explanation:

Firms must not ask customers to confirm that the required pre-contractual information has been given in accordance with these rules. The customer is most likely a layman, and they must not be asked to judge for themselves whether the firm has met its regulatory obligations.

Practical Guidance:

Firms must ensure they do not ask customers to give any sort of confirmation of this type.



CONC 4.2.14

Rule Summary:

Clarifies the above rule about asking a customer if they have understood.

Explanation:

Firms are still permitted to ask a customer if they have understood the pre-contractual information, and to ask them to acknowledge that they have provided it. However, they cannot ask the customer to certify that the explanation was adequate.

Practical Guidance:

Firms should always check their customers’ understanding of key concepts, but without asking them to confirm that they have definitely received adequate information.



CONC 4.2.15

Rule Summary:

Details contractual information which must be disclosed, on top of that in CONC 4.2.5, in special cases.



Explanation:

In addition to the information required in CONC 4.2.5, the lender and/or broker must disclose additional information in certain circumstances.

Requirements for credit token agreements include:

  • Where different interest rates and/or charges apply to different elements of the credit, this must be stated

  • A statement of the implications of only making minimum repayments

  • A statement that interest rates may increase

  • A statement that the interest rate offered may be higher as a result of any risks an individual customer is deemed to pose

  • The limitations that apply to any special offer, such as a zero interest or low interest initial period

  • Any fees, charges or other conditions applying to balance transfers

For credit card cheque arrangements, details must be given of the higher costs that apply, relating these to the costs associated with credit card payments.

For home credit and high-cost short-term credit (such as payday loans), details must be given of the implications of re-financing the loan agreement, or extending the repayment term.

For bill of sale (legal documents that record the sale of particular property) agreements, the following disclosure requirements apply:

  • That there is a risk of losing the asset that is the subject of the bill of sale, and the implications of this

  • That a court order is not required in order for the lender to re-possess the asset

  • That the debt may not be cleared in full even if re-possession takes place

  • That re-possession can still take place once the customer has repaid more than one third of the total amount repayable, unlike hire purchase and conditional sale agreements

For hire purchase and conditional sale agreements, the following disclosure requirements apply:

  • That the customer will not own the assets on which the loan is secured until all repayments have been made, and other conditions satisfied

  • That a court order is not required in order for the lender to re-possess the asset, unless at least one third of the total amount payable has been repaid

Where debt consolidation is taking place, the following disclosure requirements apply:

  • If a higher rate of interest and/or charges will apply as a result of the consolidation, this must be stated. (It is appreciated that in some cases the lender or broker may not know the full details of the debts to be consolidated).

  • That the term over which the debt will be repaid will increase

  • That the consolidation loan will be secured on the customer’s property

For a guarantor loan, the requirement to provide a guarantee must be stated.

Practical Guidance:

Firms should identify the special disclosure requirements which apply to any credit agreement they are entering into, and ensure that these are applied.



CONC 4.2.16

Rule Summary:

Relates to information disclosure to customers without a good command of English.

Explanation:

If a firm identifies that a customer does not have a good command of the English language, it should consider whether an alternative method of providing the pre-contractual information is desirable. For example, a friend or relative who does have a good command of English could be called in to assist.

Practical Guidance:

Firms should be on the lookout for any customers who appear to be struggling to understand information provided, and to suggest that a friend, relative or other person assists in these circumstances



CONC 4.2.17

Rule Summary:

Suggests providing a telephone contact to customers using electronic means.

Explanation:

By their very nature, electronic transactions do not involve dialogue between the firm and the customer. This means it can be difficult, if not impossible, to ascertain if a customer is having difficulty understanding information, whether this is due to their poor command of English, mental capacity issues or any other reason. Firms should therefore strongly consider providing a telephone contact number to all their customers, which should not be a premium rate number.

Practical Guidance:

Firms should endeavour to provide a telephone contact number for all customers, including those conducting transactions electronically.



CONC 4.2.18

Rule Summary:

Suggests how the right to request additional information may be satisfied for customers using electronic means.

Explanation:

Providing a telephone contact number or access to a comprehensive online Frequently Asked Questions facility could satisfy the requirement to provide additional information to customers who request it.

Practical Guidance:

Firms should ensure that at least one of the options referred to above is available to all customers.



CONC 4.2.19

Rule Summary:

Relates to the way the required information should be provided to customers using electronic means.

Explanation:

The required disclosure information should be provided on the screens that a customer using electronic means would visit. Firms should not simply provide a link to this information if it would be possible for a customer to conclude their agreement without visiting any one of the links.

Practical Guidance:

Firms should ensure that all of the required information is contained on the actual screens / web pages that a customer using electronic means would visit.



CONC 4.2.20

Rule Summary:

Relates to the need to provide oral clarification of customer queries in certain circumstances.

Explanation:

Where customers are conducting their transaction via telephone, or face-to-face, firms should be prepared to provide explanations orally when customers request additional information. They should not simply issue a written explanation, or refer the customer to a standard document.

Practical Guidance:

Firms should be willing to explain matters of doubt or concern orally, perhaps in addition to confirming these in writing.



CONC 4.2.21

Rule Summary:

Refers to one issue relating to variations of existing credit agreements.





Explanation:

If the credit agreement involves a modification of an existing agreement, then all of the information required by chapter 4.2 must be provided before the agreement is entered into.

Practical Guidance:

Firms should ensure that all required information is provided at the earliest possible stage where the transaction involves a modification of existing credit.



CONC 4.3 Adequate explanations: P2P agreements

CONC 4.3.1

Rule Summary:

Clarifies when chapter 4.3 applies.

Explanation:

Chapter 4.3 applies to firms operating electronic systems in relation to peer-to-peer lending activities.

Practical Guidance:

All peer-to-peer lending firms need to familiarise themselves with the provisions of this chapter.



CONC 4.3.2

Rule Summary:

Sets out circumstances in which the provisions of chapter 4.3 do not apply.

Explanation:

Apart from CONC 4.3.6, chapter 4.3 does not apply where the credit agreement is either for an amount in excess of £60,260, or is secured on land.

Practical Guidance:

Firms should ensure they are clear about when these rules apply and when they do not.



CONC 4.3.3

Rule Summary:

Adds a caveat to the exemptions in CONC 4.3.2.

Explanation:

Firms involved in the provision of per-to-peer credit that meets one both of the three exemptions listed in CONC 4.3.2, i.e. secured loans or loans above £60,260, nevertheless need to consider whether it is appropriate to disclose any or all of the detailed information we shall look at later in CONC 4.5.3 In particular, firms should consider disclosing information relating to the consequences of missing repayments or repaying less than required, such as the risk of re-possession.

Practical Guidance:

Even if they are covered by one of the two apparent exemptions, firms still need to consider what level of information they should disclose to their customers, bearing in mind that the FCA has high-level principles which say that customers must be treated fairly and their information needs must be considered.



CONC 4.3.4

Rule Summary:

Details the information that needs to be provided before a peer-to-peer agreement is entered into, and specifies other requirements as to how this information is delivered.

Explanation:

Where pre-contractual information is handed to the customer in person, they must be permitted to take that information away and consider it. The customer must be given the opportunity to ask questions about the agreement and be informed of how they can approach the firm for further assistance.

The required pre-contractual information, to be provided before a credit agreement is entered into, includes:

  • The required individual repayments, and where known, the total amount repayable over the term of the agreement

  • Any features of the agreement which make the credit unsuitable for particular uses

  • Any features of the agreement which could adversely affect the customer

  • Consequences of failing to make the required repayments, including charges for late payment, the impact on the customer’s credit rating and the implications for future credit applications, the possibility that legal action may be taken to recover the debt and the possibility of re-possession of the customer’s home or other security

  • Details of any right a customer has to withdraw from the agreement, together with information on when and how such a right should be exercised

The advice to the customer to consider this information, and the explanation of how they can seek further assistance, can generally be given either orally or in writing. However, if the information about unsuitable features, required payments and withdrawal rights is given either orally or distributed to the customer in person, then the information about features which could have an adverse effect, consequences of failing to make repayments and the advice to consider the disclosure information required under section 55 (1) of the Consumer Credit Act (CCA) must also be given orally.

The required information under this section of the CCA concerns the risks, the required repayment and the consequences of not making repayments.

Practical Guidance:

Firms should familiarise themselves with the information which needs to be disclosed, and ensure that it is disclosed in all cases.



CONC 4.3.5

Rule Summary:

Relates to the need to observe the requirements of the previous chapter.

Explanation:

Peer-to-peer lending companies are also required to comply with the requirements of chapter 4.2. Although this chapter sets out a series of requirements for lenders, peer-to-peer firms are required to follow these requirements as if they were the lender.

Practical Guidance:

Peer-to-peer lending firms must ensure they are familiar with CONC 4.2 as well as the specific section which relates to them.



CONC 4.3.6

Rule Summary:

Details a required risk warning for secured peer-to-peer credit agreements.

Explanation:

Credit agreements which are secured on land require the peer-to-peer lending company to prominently give the following risk warning: “YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT”

Practical Guidance:

Firms must ensure that this risk warning is given for all secured credit agreements.



CONC 4.4 Pre-contractual requirements: credit brokers

CONC 4.4.1

Rule Summary:

Explains when chapter 4.4 applies.

Explanation:

Chapter 4.4 applies to credit broking activities in relation to regulated credit agreements.

Practical Guidance:

All credit brokers should ensure they are familiar with the content of this chapter.







CONC 4.4.2

Rule Summary:

Sets out requirements for brokers to disclose their fees.

Explanation:

Brokers must disclose to the customer any fee which applies for providing their services.

Before any agreement is entered into, the broker and customer must agree the amount of this fee, and a copy of the fee agreement must be given to the customer in a durable medium (a format which allows the customer to take away the agreement and consider its provisions).

If the broker relies on the lender to calculate the Annual Percentage Rate, will charge the lender a fee for this and will then pass this fee on to the customer, the amount of this fee must be disclosed to the lender.

Brokers must inform their customers of when the fee is payable, and how it will be payable (e.g. via deduction from the contract, via cheque etc.). Customers must also be informed of the circumstances in which a refund of this fee may be available. This includes an explanation of section 155 of the Consumer Credit Act, which requires brokers to refund their fee, less £5, if the customer has not effected credit within six months of the date their details are referred by the broker.

Practical Guidance:

Brokers must ensure they disclose all of their fees in a clear and transparent manner, and that they understand all of the rules relating to fee disclosure.



CONC 4.4.3

Rule Summary:

Relates to provision of credit broking information notices.

Explanation:

A credit broker cannot request or take a fee or charge unless it complies with all of the conditions in this rule. This also applies to any fees to be paid to third parties.

Firstly, the firm must provide a credit broking information notice, which communicates the following information to the customer in a durable medium (a format which allows the customer to take away the agreement and consider its provisions):

  • The full legal name of the firm as it appears in the Financial Services Register

  • A statement that the firm is a broker and not a lender (or if the firm also acts as a lender, a statement that it is acting as a broker for the purposes of this transaction)

  • That the customer is required to, or may be required to, pay a fee or charge for the firm’s services

  • The amount of the fee or charge, or where this is not known, the basis on which it will be calculated

  • When the fee or charge is payable, and details of the method by which the payment will be collected (e.g. via deduction from the contract, via cheque etc).



(Apart from the firm’s trading name and contact details, no other information should be included on the information notice).

Secondly, the firm must receive confirmation from the customer, also in a durable medium, that they have received the above information and are aware of its contents.

The firm must maintain records of each information notice, and the associated customer confirmations.

Practical Guidance:

Firms that charge fees must ensure they comply with all of these requirements.



CONC 4.4.4

Rule Summary:

Lists some exemptions to the requirements of CONC 4.4.3.

Explanation:

The CONC 4.4.3 requirements do not apply where a customer indicates that they wish to enter into a credit agreement secured via a mortgage on land or property, where the firm indicates to the customer that they are only prepared to carry out broking activities in respect of a loan secured on land, and where the firm does not give any indication that it is prepared to consider other forms of lending for the customer.

Practical Guidance:

Firms should ensure that these circumstances apply before they seek to rely on an exemption from the information notice requirements.



CONC 4.4.5

Rule Summary:

Provides additional guidance in respect of CONC 4.4.3.

Explanation:

Firms cannot ask for payment details from customers, such as credit or debit card information, until all of the requirements of CONC 4.4.3 have been met. This includes the need for the customer to provide an acknowledgement. This means that customers should not be able to access any webpage that asks them provide payment information until the information has been provided and the acknowledgement received.

CONC 4.4.3 applies to all fees and charges payable to the firm by the customer, including anything described by a different name, such as a ‘membership fee’ or a ‘web information fee’. It also applies to cases where the fee is paid for by credit.

Firms must note the requirement not to include any information that is not required on the information notice, apart from the firm’s trading name and contact details.

Providing the information on a web page does not meet the ‘durable medium’ requirement.

The information on the notice must be clear and concise and written in plain English.

Where one broker introduces a customer to another, the second broker must also issue the notice and obtain an acknowledgement before any fees can be obtained.



CONC 4.5 Commissions

CONC 4.5.1

Rule Summary:

Sets out when chapter 4.5 applies.

Explanation:

CONC 4.5.2 applies to lenders and CONC 4.5.3 and CONC 4.5.4 to brokers who handle credit agreements and consumer hire agreements.

Practical Guidance:

Both lenders and brokers should ensure they understand the provisions of this chapter.



CONC 4.5.2

Rule Summary:

Explains the specific circumstances in which lenders can enter into commission arrangements.

Explanation:

A lender must not enter into a commission arrangement with another firm unless it can be justified on the basis that the firm in question needs to undertake extra work in connection with the business to which the commission relates.

Practical Guidance:

Lenders should be very wary of entering into commission arrangements.



CONC 4.5.3 & CONC 4.5.4

Rule Summary:

Relates to disclosure of commission by brokers.

Explanation:

A broker should always disclose the amount of commission they receive from a lender on a credit agreement or consumer hire agreement when a customer asks about this.

If the payment of the commission could impact in any way on the firm’s impartiality when recommending a particular credit product, or has a bearing on the customer’s decision as to whether to proceed, then the amount of the commission must always be disclosed, even if the customer does not ask for it. This information must be provided to the customer in good time before the credit agreement or consumer hire agreement is entered into.

Practical Guidance:

Brokers should be aware of when they need to disclose the commission they receive.



CONC 4.6 Pre-contract disclosure: continuous payment authorities

CONC 4.6.1

Rule Summary:

Explains which firms chapter 4.6 applies to.

Explanation:

Chapter 4.6 applies to lenders, consumer hire firms and peer-to-peer lending firms.

Practical Guidance:

All firms in these categories should ensure they are familiar with the requirements of this chapter.



CONC 4.6.2

Rule Summary:

Explains the information which must be disclosed regarding continuous payment authority (CPA).

Explanation:

CPA is a facility under which a firm, once a loan repayment is due, can make requests for payments from a customer’s bank account in order to make the required repayments.

The following information about CPA must be provided to the customer before the credit agreement, consumer hire agreement or peer-to-peer agreement, as applicable, is entered into:

  • What CPA is and how it works

  • How the firm will use CPA

  • For providers of high-cost short-term credit, such as payday lenders, that CPA can only be used twice in respect of each repayment instalment (or twice in total if the loan only requires one repayment), and can only be used to collect either the full amount due, in the case of a single repayment, or the full amount of an instalment. (See the permitted exception below though, when the customer consents to part payment being taken.)

  • How a CPA can be cancelled by the customer

  • Whether alternative payment options are available, and what these are

  • Whether an alternative repayment date is available

  • The consequences for the customer if sufficient funds are not available on the date CPA is used

  • Whether further attempts would be made to collect payment via CPA if the first such attempt was unsuccessful, and if so, when and how often these attempts would be made

  • Whether the firm might collect a part payment of the required amount using CPA, and if so, how frequently a part payment would be sought. Any minimum amount, or percentage of the amount due, applicable to this part payment facility should also be disclosed.

  • That providers of high-cost short-term credit, such as payday lenders, can only use CPA to collect part payment if the firm and customer have agreed to this and the customer has been informed of how much will be taken in part payment and when

  • Whether fees and charges will be incurred by using CPA, and if so, the amount of these fees or charges, how they are calculated and the circumstances in which they may be charged

Practical Guidance:

Firms who use CPA must ensure that they provide all of this information before the agreement is entered into



CONC 4.6.3

Rule Summary:

Explains the need to refer to CPA in the agreement documentation.

Explanation:

The terms and conditions relating to CPA must be included in before the credit agreement, consumer hire agreement or peer-to-peer agreement, as applicable.

Practical Guidance:

Firms who use CPA must ensure that information concerning it appears in their agreements with borrowers.



CONC 4.6.4

Rule Summary:

Explains the need to explain CPA clearly.

Explanation:

Firms must clearly explain how CPA works in plain English.

Practical Guidance:

Firms should review the way they explain CPA and consider whether it meets the ‘clear, fair and not misleading’ requirement.



CONC 4.7 Information to be provided on entering a current account agreement

CONC 4.7.1

Rule Summary:

Clarifies to which firms chapter 4.7 applies.

Explanation:

Chapter 4.7 applies to consumer credit lenders.

Practical Guidance:

Lenders who offer current account overdraft facilities should familiarise themselves with this chapter.



CONC 4.7.2

Rule Summary:

Details the information that needs to be provided to customers who enter into overdrafts.

Explanation:

Where a customer enters into an overdraft agreement on a current account, whereby it is possible for them to either go overdrawn without permission or exceed a previously agreed overdraft limit, then the following information needs to be provided to the customer:

  • The rate of interest charged on the amount of unauthorised overdraft

  • Any conditions relating to that interest rate

  • Any reference interest rate on which the overdraft interest rate is based

  • Any changes that may apply to the interest rate stated, including any limited time periods for which the initial interest rate is valid, and details of the procedure the firm will follow for changing the rate

  • Any other charges payable, together with details of the circumstances in which these charges would be levied

Where different rates of interest apply to the overdraft in different circumstances, the disclosure requirements listed above apply separately to each different interest rate.

Practical Guidance:

Firms must ensure that all of this information is provided.













CONC 4.8 Pre-contract: unfair business practices: consumer credit lending

CONC 4.8.1

Rule Summary:

Clarifies to which firms chapter 4.8 applies.

Explanation:

Chapter 4.8 applies to all firms engaged in lending activity.

Practical Guidance:

Lenders must ensure they are familiar with the content of this chapter, and what practices are considered unfair.



CONC 4.8.2

Rule Summary:

Relates to providing incentives without giving customers time to consider the terms and conditions.

Explanation:

A firm must not try and induce, encourage or persuade a customer to complete their credit agreement quickly. Customers must instead be given sufficient time to consider the pre-contractual information, which was explained at length earlier in Chapter 4.

Practical Guidance:

Firms must ensure no customer is unduly encouraged to complete their loan application before they have been able to properly consider whether they wish to proceed. Offering an inducement, financial or otherwise, to complete quickly is especially frowned upon.



CONC 4.8.3

Rule Summary:

Clarifies the restriction in CONC 4.8.2.

Explanation:

Firms are still entitled to set end dates for promotions, and doing so will not by itself contravene the requirement in CONC 4.8.2 not to provide inappropriate incentives.





Practical Guidance:

Firms are entitled to run promotions for limited periods, but must ensure that all customers, whether they are seeking to benefit from the terms of that promotion or not, are given sufficient time to consider the terms and conditions.



CONC 4.8.4

Rule Summary:

Relates to providing incentives to borrow more money.

Explanation:

Firms must not inappropriately encourage or incentivise customers to borrow more than they have asked for.

Practical Guidance:

Firms must ensure that no customer is ever encouraged to borrow more than they have requested, except in the circumstances explained in CONC 4.8.5 below.



CONC 4.8.5

Rule Summary:

Explains some circumstances in which it may be appropriate to offer additional credit to customers.

Explanation:

It is not unfair to offer a customer more credit than they have requested, provided that no pressure is exerted on them to accept the higher offer, and no incentives are provided to do so. Such customers must be subject to a suitably robust creditworthiness assessment. It may be particularly appropriate to offer additional credit where more advantageous prices, terms or conditions are available on larger loans, and where these better terms are clearly explained.

Practical Guidance:

Firms must ensure that all of the requirements listed in this rule apply before they consider offering a customer additional credit.



CONC 4.8.6

Rule Summary:

Relates to statements or implications that repayments will be reduced via a new credit agreement.

Explanation:

Firms must not state or imply that a new credit agreement will reduce a customer’s debt repayments when one credit agreement with the same term replaces another previous agreement, unless this actually is the case.

Practical Guidance:

Firms should refrain from stating or implying this when it is not the case.



CONC 5.1 Application

CONC 5.1.1

Rule Summary:

Clarifies when chapter 5.1 applies.

Explanation:

Chapter 5.1 applies to all firms engaged in lending activity, except where stated otherwise.

Practical Guidance:

All lenders should take note of the content of this chapter.



CONC 5.2 Creditworthiness assessment: before agreement

CONC 5.2.1

Rule Summary:

Explains the requirements for carrying out credit checks.

Explanation:

Except in certain limited circumstances, lenders need to carry out creditworthiness checks on their customers. The requirements set out in CONC 5.2.1 do not apply where the agreement is secured on land, or where it is a pawnbroking arrangement. They also do not apply to small borrower-lender-supplier agreements, or to overdrafts unless they occur under an authorised overdraft agreement.

The two key elements of a creditworthiness assessment are the customer’s ability to make the required repayments over the term of the agreement (or for a reasonable period where the term is open-ended) and the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

All information the firm requires to carry out the creditworthiness assessment should be obtained from the customer and/or a credit reference agency, as necessary.

Practical Guidance:

Firms must carry out a credit assessment of all potential borrowers that allows them to gain a full picture of the level of risk lending to that customer would entail.







CONC 5.2.2

Rule Summary:

Clarifies when the credit check requirements apply for agreements excluded under CONC 5.2.1.

Explanation:

CONC 5.2.1 does not cover unauthorised overdrafts or secured loans. However, while no form of credit check is required for an unauthorised overdraft, a check of sorts is still required for secured loans, whether they are secured on land or are pawnbroking arrangements. Firms still need to assess the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

Practical Guidance:

Firms should ensure that an adequate suitability check is carried out on all potential borrowers, even if a full credit check is not carried out.



CONC 5.2.3

Rule Summary:

Explains the required scope of creditworthiness assessments.

Explanation:

Credit checks may need to take into account:

  • The type of credit being offered

  • The amount to be borrowed

  • The total cost of the credit

  • The customer’s financial position at the time of the application

  • The customer’s previous credit history, including any evidence of current or previous financial difficulties

  • The customer’s existing financial commitments, such as repayments on other credit, rent, council tax and utilities

  • Future commitments of the customer that can reasonably be foreseen at the time of the application

  • Future changes in customer circumstances which can be reasonably foreseen, and which would have a significant adverse impact on their financial situation

  • Any evidence that the customer would be classed as a ‘vulnerable customer’, particularly if they display evidence of mental capacity problems





Practical Guidance:

Firms must ensure that all of the factors listed here are considered where relevant. Lending should only take place to a customer who the firm reasonably expects to be able to meet their repayment obligations, both now and in the future.



CONC 5.2.4

Rule Summary:

Adds a caveat to CONC 5.2.3.

Explanation:

Despite the list of factors to consider in CONC 5.2.3 above, the rules go on to say that to insist that all these issues are considered in every case would be disproportionate.

The type of credit being offered, the amount of credit and the risks associated with the proposed agreement should all be used to determine exactly how rigorous a credit assessment would need to be. A particularly rigorous assessment would be expected to take place when the credit would be secured on the customer’s home.

Information which might need to be considered in a credit check includes:

  • Any previous dealings the customer has had with the firm

  • Evidence of income

  • Evidence of expenditure

  • The customer’s credit score (credit rating)

  • A report from a credit reference agency

  • Information provided by the customer

Practical Guidance:

Firms should carefully consider the risks posed by any proposed credit, and conduct more comprehensive credit checks where higher risks exist.



CONC 5.3 Conduct of business in relation to creditworthiness and affordability

CONC 5.3.1

Rule Summary:

Explains some key concepts relating to creditworthiness checks and affordability assessments.

Explanation:

An affordability assessment should go beyond whether the customer can afford the repayments. They may be in a position to make repayments, but if doing so would have a significant adverse effect on their financial situation, then the proposed credit is unlikely to be suitable.

Expected future changes in income or expenditure, whether they involve increases or decreases, can be taken into account in affordability assessments if evidence of these expected changes is available. If it would be expected that a customer’s expenditure would rise in the future for any reason (e.g. new mortgage, birth of a child etc), then the proposed credit should only be granted if the required repayments are expected to be sustainable once the increase in expenditure has occurred.

The same applies if a fall in income is expected. Reasons for this might include retirement or impending loss of a job.

Evidence of income and expenditure should be sought, and it will not normally be sufficient to rely solely on information supplied by the customer in this respect. Income may be verifiable via bank statements, payslips, tax returns or certified accounts, and expenditure may be verifiable via bills, statements, bank statements etc.

In most cases, the required repayments will need to be affordable based on the customer’s current income, as in almost all cases the need to make repayments will commence as soon as the agreement commences. One possible exception to this is where repayments can be deferred until income has reached a certain level, such as in the case of loans for student tuition fees.

The definition of ‘sustainable’ the FCA uses requires that:

  • The customer is able to make the required repayments and meet their other financial commitments without serious difficulty

  • The customer can continue to do this throughout the lifetime of the agreement (or for a reasonable period where it is open-ended)

  • The customer does not need to borrow further sums in order to pay off existing credit

  • The repayments can be met from income and/or savings without the need to realise any security associated with the credit

In the case of running account credit (agreements to which a credit limit applies), then assessments should be made around the customer’s ability to repay the maximum amount of credit available. It may be reasonable to consider the time it would typically take to repay a personal loan for the same amount as the credit limit when deciding what the ‘reasonable period’ referred to above might be. Assessments should never be made based on the minimum required payment.

The level of the credit limit granted to a customer must be based on the results of a suitably rigorous creditworthiness assessment and on what level of repayment the customer could reasonably be expected to afford without experiencing serious difficulties.

Lenders are encouraged to share information on a customer’s record of repaying their credit obligations with other lenders and with credit reference agencies.

Practical Guidance:

Firms should ensure their credit and affordability checks comply with these requirements.



CONC 5.3.2

Rule Summary:

Relates to the need to have procedures in place for assessing creditworthiness.

Explanation:

Firms should have policies and procedures for assessing creditworthiness.

Practical Guidance:

Firms should have a documented procedure explaining how they go about establishing creditworthiness of applicants, and ensure that this procedure is followed in all cases



CONC 5.3.3

Rule Summary:

Relates to the checking of information supplied in connection with a creditworthiness assessment.

Explanation:

When a firm gathers information to assist with its decision on the creditworthiness of an applicant, it needs to take reasonable steps to verify that this information is correct. This particularly applies to any information supplied by the customer themselves.

Practical Guidance:

Firms should check information received wherever possible. Income may be verifiable via bank statements, payslips, tax returns or certified accounts, and expenditure may be verifiable via bills, statements, bank statements etc. Information about credit history might be available from a credit reference agency.



CONC 5.3.4

Rule Summary:

Relates to the requirement to carry out proper checks and not rely on the security for the loan.

Explanation:

Firms are required to carry out credit and affordability checks as previously documented. They cannot simply rely on the fact that security has been provided to determine that the loan is suitable. The only permitted exception to this is in a pawnbroking arrangement when the customer’s liability (inclusive of interest, fees and charges) is no more than the market value of the article provided as security.

Practical Guidance:

Firms should always take care to carry out proper credit and affordability checks.



CONC 5.3.5

Rule Summary:

Relates to offering more credit to a customer than originally requested.



Explanation:

A lender must not encourage, advise or induce a customer to take more credit than they originally requested if the results of credit and/or affordability assessments indicate that the repayments associated with the higher amount of credit would not be sustainable.

Practical Guidance:

Firms must ensure that advice or inducements of this nature are not given.



CONC 5.3.6

Rule Summary:

Sets out one rule relating to completion of credit applications.

Explanation:

If a firm completes all or part of a credit application on behalf of a customer, then either the customer must give their consent for this, or the customer shall be allowed to check the application before being asked to sign it.

Practical Guidance:

Firms must ensure customers are given sufficient time to check credit applications before being asked to sign them.



CONC 5.3.7

Rule Summary:

Relates to knowing or suspecting a customer has provided incorrect information.

Explanation:

If a firm knows, or has reason to suspect, that a customer has supplied incorrect information regarding their creditworthiness and/or their ability to afford the required repayments, then that customer’s application for credit must not be accepted.

Practical Guidance:

Firms need to carry out reasonable checks as to the accuracy of information supplied by the customer, and must adopt a zero-tolerance approach to any information known or suspected to be, inaccurate.



CONC 5.3.8

Rule Summary:

Gives an example to clarify CONC 3.5.7.



Explanation:

If a customer supplies income or expenditure information which is inconsistent with evidence available from other sources, then this would be grounds for not accepting the application, as explained in CONC 3.5.7.

Practical Guidance:

Firms should always check information supplied by the customer with that available from external sources, and be prepared to take action if there are any discrepancies.



CONC 5.4 Conduct of business: credit brokers

CONC 5.4.1

Rule Summary:

Clarifies when chapter 5.4 applies.

Explanation:

Chapter 5.4 applies to credit broking activities.

Practical Guidance:

Brokers must ensure they are familiar with the content of this chapter.



CONC 5.4.2

Rule Summary:

Relates to considering the customer’s circumstances when giving advice.

Explanation:

When giving advice, making recommendations or explaining products, brokers should consider all applicable information regarding the customer’s needs and circumstances. This includes considering whether the customer can afford the required repayments, and whether anything they know, or reasonably ought to know, about the customer might make the proposed contract unsuitable.

Practical Guidance:

Brokers should ensure that a comprehensive assessment of whether a credit product is suitable for a customer takes place, and that customers are only advised to enter into contracts which are suitable for then.



CONC 5.4.3

Rule Summary:

Relates to being transparent with the customer as to how many providers a broker will consider products from.

Explanation:

If a broker has informed a customer that it will search all or part of the relevant market to find the most suitable product, then it must perform this search to the extent promised. There is nothing wrong with only offering credit products from one provider, as long as the broker has been clear about this from the outset.

Practical Guidance:

Firms must be clear as to whether they can offer products from just one provider, from a panel of selected providers or from all providers. They must then recommend the most suitable product from those available, considering the customer’s needs and circumstances. If a firm cannot offer a suitable product, it must not make a recommendation.



CONC 5.5 Creditworthiness assessment: P2P agreements

CONC 5.5.1

Rule Summary:

Sets out which firms chapter 5.5 applies to.

Explanation:

Chapter 5.5 applies to firms that operate an electronic system in order to facilitate peer-to-peer lending.

Practical Guidance:

All peer-to-peer lending firms should ensure they are familiar with the requirements of this chapter.



CONC 5.5.2

Rule Summary:

Clarifies some definitions for terms used in respect to peer-to-peer lending.

Explanation:

Chapter 5.5 applies to firms who facilitate the peer-to-peer lending activity by maintaining a platform or similar. Such firms are not subject to the detailed requirements in CONC 5.2 that apply to lenders.

A lender in a peer-to-peer agreement is likely to be subject to the rules of CONC and the Consumer Credit Act if they lend money via the peer-to-peer platform in the course of their normal business activities. In these circumstances, a peer-to-peer lending agreement would constitute a regulated credit agreement.

Practical Guidance:

Firms should satisfy themselves as to which parts of the rulebook apply to them. Those who lend money under peer-to-peer agreements should ask themselves if they lend in the course of normal business activities, and hence whether they are likely to be subject to the CONC rules.



CONC 5.5.3

Rule Summary:

Explains the credit checking responsibilities of peer-to-peer lending firms.

Explanation:

Although the peer-to-peer firm is not itself the lender, it must still carry out a rigorous assessment of the creditworthiness of each potential borrower.

The two key elements of a creditworthiness assessment are the customer’s ability to make the required repayments over the term of the agreement (or for a reasonable period where the term is open-ended) and the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

All information the firm requires to carry out the creditworthiness assessment should be obtained from the customer and/or a credit reference agency, as necessary.

The only potential exemption to this requirement is where the per-to-peer lending assessment involves a pawnbroking arrangement, for the requirements that apply here, see CONC 5.5.6 below.

Practical Guidance:

Peer-to-peer firms must ensure they carry out sufficient credit checks on all prospective borrowers.



CONC 5.5.4

Rule Summary:

Explains that peer-to-peer firms are subject to the same rules on creditworthiness and affordability as lenders.

Explanation:

Although the peer-to-peer firm is not itself the lender, it must still comply with the requirements of CONC 5.3 as if it were the lender.

Practical Guidance:

Peer-to-peer firms must ensure they are familiar with the requirements of CONC 5.3 as well as those in this chapter.



CONC 5.5.5

Rule Summary:

Relates to firms’ need to consider sufficient information in a creditworthiness check.

Explanation:

A firm must gather and evaluate such information as is necessary to allow it to carry out a rigorous credit check as required by CONC 5.5.3.

Practical Guidance:

Firms should ensure they gather as much information as possible from the customer themselves, credit reference agencies and other sources.



CONC 5.5.6

Rule Summary:

Explains the creditworthiness requirements when a pawnbroking arrangement is associated with a peer-to-peer agreement.

Explanation:

Where a pawnbroking arrangement is associated with a peer-to-peer agreement, the firm’s creditworthiness assessment must include consideration of the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

A peer-to-peer lending firm must also comply with the requirements of CONC 5.3 as if it were the lender with regard to assessing creditworthiness and affordability

Practical Guidance:

Peer-to-peer firms must ensure they are familiar with the requirements of CONC 5.3 as well as those in this chapter.



CONC 5A.1 Application, purpose and guidance

CONC 5A.1.1

Rule Summary:

Sets out when chapter 5A applies.

Explanation:

Chapter 5A applies to all high-cost short-term loans entered into on or after January 2 2015. It also applies to all variations or supplements to high-cost short-term loans entered into on or after this date, which impose one or more charges on the customer. In addition, it applies to any agreement entered into on or after this date that varies or supplements an existing high-cost short-term loan.

Practical Guidance:

Firms offering high-cost short-term loans (such as payday loans) must ensure they are familiar with the rules in this chapter.



CONC 5A.1.2

Rule Summary:

Clarifies CONC 5A.1.2

Explanation:

Variations and supplements to existing high-cost short-term loans are covered by the provisions of this chapter if they result in existing charges being increased, or in new charges being imposed. An example would be where the loan term is extended and additional interest becomes payable.

Chapter 5A goes on to talk about three cost caps that relate to high-cost short-term loans – the total cost cap, the initial cost cap and the default cap. If a variation or supplement is imposed, the charges that applied to the loan before January 2 2015, when the caps came into force, will count towards the various caps. If the charges that already applied to the loan prior to January 2 2015 exceed any of the caps, then a variation or supplement to that agreement will not be permitted.

Practical Guidance:

Firms should ensure they understand the clarifications given here, particularly regarding when a variation or supplement is not possible.



CONC 5A.1.3

Rule Summary:

A purely legal statement.



CONC 5A.1.4 & CONC 5A.1.5

Rule Summary:

Explains the statutory context surrounding the cost cap rules.

Explanation:

The FCA has a statutory objective to secure an appropriate degree of protection for customers. The cost cap rules are designed with this objective in mind, so that borrowers can be protected from excessive charges.

Practical Guidance:

Helps firms to understand the reasons behind the cost cap rules.



CONC 5A.1.6 & CONC 5A.1.7

Rule Summary:

Explains some of the items included in the cost cap.

Explanation:

The rules in this chapter apply to charges such as:

  • Interest payable on the loan

  • Late payment charges

  • Charges for the transmission of funds

  • Charges for early repayment, re-financing or changing the due date or termination date

  • Charges for drawing down credit

  • Charges imposed by any credit broker with whom the lender has an association

  • Charges for ancillary services

  • Interest on any of the above charges



Practical Guidance:

Firms should ensure they understand which charges the cost cap applies to.



CONC 5A.2 Prohibition from entering into agreements for high-cost short-term credit

CONC 5A.2.1

Rule Summary:

Clarifies to whom CONC 5A.2 applies.

Explanation:

CONC 5A.2 applies to lenders and brokers in respect of high-cost short-term loans, the definition of which includes payday lending.

Practical Guidance:

Lenders and brokers must ensure they are familiar with the content of this section.

 

CONC 5A.2.2

Rule Summary:

Explains the basic principle behind the total cost cap.

Explanation:

The total cost cap requires that no borrower is ever required to enter into a credit agreement for high-cost short-term credit where any one of the charges, or a combination of the charges on the agreement and any related agreement, exceed the total cost cap. If the precise level of charges is not known, then the maximum possible charge must be set within the cap.

Practical Guidance:

Firms must ensure that all agreements comply with this requirement.

 

CONC 5A.2.3

Rule Summary:

Explains the initial cost cap.

Explanation:

Under the initial cost cap, the amount the customer has to pay in interest and other charges (including payments on a connected agreement) cannot exceed 0.8% of the loan amount per day. So for example, on a £100 loan, a customer cannot be asked to repay more than £0.80 per day. This limit applies from the day the customer accesses the credit to the end of the agreement (or to the extended end date if the loan term is subsequently increased). For the purposes of this section of the rulebook, references to charges include any charges, fees or interest payments the borrower needs to pay.

Practical Guidance:

Firms must ensure that repayments are no higher than the level of this cap.

 

CONC 5A.2.4

Rule Summary:

Adds a caveat to CONC 5A.2.3.

Explanation:

Charges under the default cap, as explained in CONC 5A.2.14 below, default fees are not included in the initial cost cap.

Practical Guidance:

Firms should be aware of this, and of the separate default cap requirements.

 

CONC 5A.2.5

Rule Summary:

Clarifies CONC 5.2.3.

Explanation:

The initial cost cap is 0.8% per day, the amount given by this calculation should be multiplied by the number of days the agreement runs for. So for example, on a £100 loan, a customer cannot be asked to repay more than £0.80 per day, equivalent to £24 for a 30 day loan.

Practical Guidance:

Firms should ensure they are aware of this important qualification.

 

CONC 5A.2.6

Rule Summary:

Explains the definition of the credit amount used.

Explanation:

The figure to be used for the amount of credit, for the purposes of calculating the total cost cap, is the lower of the credit limit under the agreement, and the amount that is actually lent.

Practical Guidance:

Firms must ensure they are aware of this definition.

 





CONC 5A.2.7 & CONC 5A.2.8

Rule Summary:

Explains the effect of early repayments on the cost cap rules.

Explanation:

When calculating the initial cost cap as per CONC 5.2.3, firms cannot re-calculate this based on the amount that remains outstanding after the customer has repaid some of the sum due. The original loan amount must still be used to calculate the maximum permitted daily charge.

Practical Guidance:

Firms must ensure they follow this rule when calculating the cap.



CONC 5A.2.9

Rule Summary:

Clarifies the situation where a loan allows customers to draw down credit in several tranches.

Explanation:

If a loan allows a customer to draw down credit in several tranches, and each separate drawdown requires the lender’s approval, then the firm must treat each drawdown as a separate loan, and issue a separate credit agreement for each. The caps then applies according to the terms of each agreement individually.

Practical Guidance:

Firms must ensure that separate agreements are drawn up where necessary.



CONC 5A.2.10

Rule Summary:

Explains the relevance of the caps to re-financed agreements.

Explanation:

A firm cannot enter into a re-financed agreement if it would lead (or may lead) to the total charges on the original loan, the re-financed loan and any connected agreement being in excess of the amount borrowed. Here the reference to ‘amount borrowed’ would mean the total of the original loan and the re-financed loan. Essentially, this is saying that no high-cost short-term loan borrower should ever be asked to pay more in charges than the amount they have borrowed.

Practical Guidance:

Firms should ensure that no borrower is asked to repay more in charges than the amount they have borrowed, regardless of the fact a loan may have been re-financed.



CONC 5A.2.11

Rule Summary:

Explains the rules applying to default charges on re-financed agreements.

Explanation:

A firm cannot enter into a re-financed agreement if it would lead (or may lead) to the charges imposed for breaches of the agreement (default fees) on the original loan, the re-financed loan and any connected agreement totalling more than £15. See more on default fees in CONC 5A.2.14 below.

Practical Guidance:

Firms should ensure that all re-financed loans comply with this limit.



CONC 5A.2.12

Rule Summary:

Adds a caveat to CONC 5A.2.10.

Explanation:

In the event that a firm puts in place a new agreement which replaces an earlier credit agreement, and the payment due date on the new agreement is earlier than on the old agreement, then any charge under the earlier agreement which is never paid as a result can be disregarded for the purposes of CONC 5A.2.10 (ensuring borrowers do not have to repay more in charges than the amount of the loan).

Practical Guidance:

Firms should take note of the circumstances that must apply for this exemption to be relied upon:



CONC 5A.2.13

Rule Summary:

Explains the situation where the firm has provided a sum to enable a borrower to repay.

Explanation:

In the event that a firm has provided a sum to a borrower under an earlier agreement, to allow them to either pay sums due or pay charges, then this amount shall not be regarded as part of the credit amount provided for the purposes of calculating either the initial cost cap under CONC 5A.2.3, or the amount a borrower can be asked to repay under CONC 5A.2.10.

Practical Guidance:

Firms must be aware of this specific consideration.





CONC 5A.2.14

Rule Summary:

Explains the default fee cap.

Explanation:

Firms cannot enter into agreements where charges for breaches of the agreement (default fees) will exceed (or could exceed) £15.

The cap of 0.8% on daily interest and charges is also mentioned again here.

Practical Guidance:

Firms must ensure their default fees will not exceed the default fee cap.



CONC 5A.2.15

Rule Summary:

Refers to applicable legislation.

Explanation:

The requirement under section 93 of the Consumer Credit Act 1974 not to increase interest rates payable in the event of default still applies, and firms are reminded of this here.

Practical Guidance:

Firms must ensure they do not increase the interest rate payable in case of default.



CONC 5A.2.16

Rule Summary:

Explains a key issue when a borrower deals with a credit broker.

Explanation:

If a broker is part of the same group as the lender, or will share some of the charges with the lender, then the broker’s charges will be included in the total cost cap and the initial cost cap. The charges agreement with the broker will be regarded as a connected agreement to that of the main credit agreement.

Practical Guidance:

Brokers, and lenders that deal with brokers, should ensure that total charges remain within the relevant caps.







CONC 5A.2.17

Rule Summary:

Relates to provision of ancillary services.

Explanation:

If a borrower is required to pay a charge for ancillary services, then this charge is to be taken into account when calculating the total cost cap, the initial cost cap and the default fee cap. If the requirement to pay the ancillary charge is not detailed in the main credit agreement, then the agreement under which the ancillary charge needs to be paid is regarded as a connected agreement.

Practical Guidance:

Firms must ensure ancillary charges are included when calculating the level of the caps.



CONC 5A.2.18

Rule Summary:

Gives examples of ancillary services.

Explanation:

The ancillary services referred to in CONC 5A.2.17 above might refer to service charges, transmission fees and insurance costs.

Practical Guidance:

Firms must ensure they are aware of what might constitute an ancillary charge, and also that the examples quoted in this rule are not the only ancillary charges that might apply.



CONC 5A.2.19

Rule Summary:

Relates to the way interest is calculated.

Explanation:

Firms must use simple interest when calculating interest charges, and must not use compound interest.

Practical Guidance:

Firms must ensure they comply with this restriction.







CONC 5A.3 Prohibition from imposing charges under agreements for high-cost short-term credit

CONC 5A.3.1

Rule Summary:

Clarifies to which firms CONC 5A.3 applies.

Explanation:

CONC 5A.3 applies to lenders, debt administrators, debt collectors and firms that operate an electronic system with regard to lending (peer-to-peer lending firms). It applies to credit agreements which meet the definition of high-cost short-term credit, which includes payday loans.

Practical Guidance:

These firms must ensure they are familiar with the content of this chapter.



CONC 5A.3.2

Rule Summary:

Explains the total cost cap.

Explanation:

Firms cannot impose charges (including required interest payments) that in total will, or might, lead to the borrower needing to pay more in charges than the amount of their loan. Any charges on connected agreements must be included when assessing compliance with this rule. Firms must also not instruct any other party to impose such a charge.

In many ways, the rules in this chapter are worded in a similar way to CONC 5A.2. However, while that chapter referred to firms being prohibited from entering into agreements which breached the cost caps, this chapter concerns firms imposing charges on existing agreements which might lead to one or more of the caps being exceeded.

Practical Guidance:

Firms must ensure they comply with the total cost cap requirements.



CONC 5A.3.3

Rule Summary:

Explains the initial cost cap.

Explanation:

Firms cannot impose charges on an agreement that together with other charges, will, or might, lead to the borrower needing to pay more than 0.8% per day in daily interest. Any charges on connected agreements must be included when assessing compliance with this rule.

If the term of the loan is extended, then this cap continues to apply throughout the extended term.

Practical Guidance:

Firms must ensure they comply with the initial cost cap requirements.



CONC 5A.3.4

Rule Summary:

Adds a caveat to CONC 5A.3.3

Explanation:

Any default fee is not considered to be a charge to which the initial cost cap applies. More on default fees can be found in CONC 5A.3.18 below.

Practical Guidance:

Firms must ensure they are aware of this rule.



CONC 5A.3.5

Rule Summary:

Provides guidance on applying the daily cost cap to longer agreements.

Explanation:

The 0.8% daily interest amount can be multiplied by the number of days the agreement runs for in order to calculate the maximum permitted interest repayment. So the cap applying to a £100 loan taken out for 30 days is (100*30*0.8)/100 = £24.

Practical Guidance:

Firms must ensure they are aware of the maximum amount they can demand in interest payments.



CONC 5A.3.6

Rule Summary:

Explains how the amount of credit to be used for the purposes of the total cost cap is determined.

Explanation:

For the purposes of calculating the total cost cap, the amount of credit shall be the lesser of the credit limit under the agreement, and the amount of credit that the lender actually provides.

Practical Guidance:

Firms should ensure they are aware of the definition used for the amount of credit.





CONC 5A.3.7 & CONC 5A.3.8

Rule Summary:

Explains the effect on the initial cost cap of early repayments.

Explanation:

For the purposes of the initial cost cap, the amount of credit to be used in the calculations is the amount of the original loan, regardless of whether the outstanding amount subsequently reduces as a result of the borrower choosing to make repayments earlier than required.

Practical Guidance:

Firms must ensure they are aware of this definition.



CONC 5A.3.9

Rule Summary:

Explains the situation regarding the charge caps when a borrower is permitted to draw down credit in tranches.

Explanation:

If a borrower is permitted to draw down credit in tranches, but requires the lender’s agreement to make each separate drawdown, then each tranche requires a separate credit agreement to be drawn up. The charge caps then apply to each separate agreement individually.

Practical Guidance:

Firms must ensure they are aware of the rules that apply to agreements of this nature.



CONC 5A.3.10 & CONC 5A.3.11

Rule Summary:

Explains the effect of re-financing on the total cost cap.

Explanation:

If an agreement is entered into that either varies or supplements an existing agreement, then the total of the charges on the new agreement, the original agreement and any connected agreement must not exceed the amount of the loan.

Practical Guidance:

Firms must ensure that they are aware of this consideration.







CONC 5A.3.12 to CONC 5A.3.15

Rule Summary:

Explains the effect of re-financing on the default cap.

Explanation:

If an agreement is entered into that either varies or supplements an existing agreement, then the total charges for breaches of the agreement on the new agreement, the original agreement and any connected agreement must not exceed £15.

More on the default cap can be found in CONC 5A.3.18 below.



CONC 5A.3.16

Rule Summary:

Adds a caveat to CONC 5A.3.10

Explanation:

If a replacement agreement is effected which replaces an earlier agreement, and the new agreement means that the outstanding amount under the original agreement is repaid earlier as a result, then charges under the agreement which never become payable are not included in the initial cost cap.

Practical Guidance:

Firms must ensure that they are aware of this caveat.



CONC 5A.3.17

Rule Summary:

Relates to the situation where a firm provides funds to a borrower to make repayments or satisfy charges.

Explanation:

If a firm has provided any amounts to a borrower to either make repayments or satisfy charges under a previous agreement, then these amounts should not be included in the calculations of the amount of credit provided.

Practical Guidance:

Firms must be aware of this caveat to the calculation of the amount of credit.



CONC 5A.3.18

Rule Summary:

Explains the default cap.

Explanation:

Firms cannot impose charges for one or more breaches of the agreement (defaults) that total more than £15.

The initial cost cap is also re-stated here.

Practical Guidance:

Firms must ensure that they do not exceed the default cap.



CONC 5A.3.19

Rule Summary:

Reminds firms of a key piece of legislation.

Explanation:

Under section 93 of the Consumer Credit Act 1974, firms must not increase the interest rate on an agreement as a result of a borrower defaulting.

Practical Guidance:

Firms must ensure they do not increase the interest rate in these circumstances.



CONC 5A.3.20

Rule Summary:

Relates to the effect of broker fees on the cost caps.

Explanation:

If a customer pays a fee to a broker that is part of the same group as the lender, or to a broker that will share its fee with the lender, then the fee paid to the broker is a charge that needs to be taken into account when determining the level of the total cost cap and the initial cost cap. The agreement providing for the broker fee is considered to be a connected agreement in these circumstances.

Practical Guidance:

Lenders, and brokers that deal with lenders in this way, need to be aware of this.



CONC 5A.3.21

Rule Summary:

Explains the effect of ancillary charges on the cost cap.

Explanation:

Where a firm imposes an ancillary charge, this charge needs to be taken into account when determining the level of the total cost cap, the initial cost cap and the default cap. Unless the ancillary charge is covered in the main credit agreement, then the agreement providing for the ancillary charge is considered to be a connected agreement.

Practical Guidance:

Firms that impose ancillary charges need to be aware of this rule.



CONC 5A.3.22

Rule Summary:

Gives examples of ancillary services for which charges might be made.

Explanation:

Ancillary charges might include processing fees and transmission fees.

Practical Guidance:

Firms need to be aware that this is not an exhaustive list of possible examples.



CONC 5A.3.23

Rule Summary:

Relates to the effect of assigning an agreement to another party on the cost caps.

Explanation:

When a firm assigns an agreement to another party, or the agreement passes to another party via a legal requirement, then charges imposed before the agreement was assigned need to be included in the calculation of the total cost cap, the initial cost cap and the default cap.

Practical Guidance:

Firms that may assign agreements, or have agreements assigned to them, need to be aware of this rule.



CONC 5A.3.24

Rule Summary:

Relates to the way interest is calculated.

Explanation:

Firms are not permitted to use compound interest when calculating interest payments under an agreement.

Practical Guidance:

Firms must ensure that they only use the simple interest method.



CONC 5A.4 Cost cap for operating an electronic system in relation to lending

CONC 5A.4.1

Rule Summary:

Clarifies to whom CONC 5A.4 applies.

Explanation:

CONC 5A.4 refers to the cost cap requirements for firms who operate an electronic system in relation to lending (peer-to-peer lending firms).

Practical Guidance:

Peer-to-peer firms should ensure they are familiar with the requirements of this chapter. In many cases, the cost cap requirements applying to lenders also apply to firms facilitating lending under peer-to-peer agreements.



CONC 5A.4.2

Rule Summary:

Explains the total cost cap.

Explanation:

A firm cannot facilitate an agreement under which a borrower is, or may be required to, pay more in charges (including interest repayments) than the amount they have borrowed.

Practical Guidance:

Firms must ensure that this requirement is complied with.



CONC 5A.4.3

Rule Summary:

Explains the initial cost cap.

Explanation:

Firms cannot impose charges on an agreement that together with other charges, will, or might, lead to the borrower needing to pay more than 0.8% per day in daily interest. Any charges on connected agreements must be included when assessing compliance with this rule.

If the term of the loan is extended, then this cap continues to apply throughout the extended term.

Practical Guidance:

Firms must ensure they comply with the initial cost cap requirements.



CONC 5A.4.4

Rule Summary:

Adds a caveat to CONC 5A.3.3

Explanation:

When calculating the level of the initial cost cap, any default fees should be excluded. More on the default cost cap can be found under CONC 5A.3.14 below.

Practical Guidance:

Firms should be aware that default charges are not included in this cap.



CONC 5A.4.5

Rule Summary:

Provides guidance on applying the daily cost cap to longer agreements.

Explanation:

The 0.8% daily interest amount can be multiplied by the number of days the agreement runs for in order to calculate the maximum permitted interest repayment. So the cap applying to a £100 loan taken out for 30 days is (100*30*0.8)/100 = £24.

Practical Guidance:

Firms must ensure they are aware of the maximum amount they can demand in interest payments.



CONC 5A.4.6

Rule Summary:

Defines the total amount of credit for the purposes of the total cost cap.

Explanation:

When calculating the level of the total cost cap, the total amount of credit is considered to be the lower of the credit limit under the agreement, and the amount of credit that is actually lent.

Practical Guidance:

Firms must ensure they are familiar with this definition.



CONC 5A.4.7 & CONC 5A.4.8

Rule Summary:

Explains the effect on the initial cost cap of early repayments.



Explanation:

For the purposes of the initial cost cap, the amount of credit to be used in the calculations is the amount of the original loan, regardless of whether the outstanding amount subsequently reduces as a result of the borrower choosing to make repayments earlier than required.

Practical Guidance:

Firms must ensure they are aware of this definition.



CONC 5A.4.9

Rule Summary:

Explains the situation regarding the charge caps when a borrower is permitted to draw down credit in tranches.

Explanation:

If a borrower is permitted to draw down credit in tranches, but requires the peer-to-peer firm’s agreement to make each separate drawdown, then each tranche requires a separate credit agreement to be drawn up. The charge caps then apply to each separate agreement individually.

Practical Guidance:

Firms must ensure they are aware of the rules that apply to agreements of this nature.



CONC 5A.4.10

Rule Summary:

Rule Summary:

Explains the effect of re-financing on the total cost cap.

Explanation:

If an agreement is entered into that replaces an existing agreement, then the total of the charges (including interest payments) on the new agreement, the original agreement and any connected agreement must not exceed the amount of the loan.

Practical Guidance:

Firms must ensure that they are aware of this consideration.



CONC 5A.4.11

Rule Summary:

Explains the effect of re-financing on the default cap.



Explanation:

If an agreement is entered into that replaces an existing agreement, then the total charges for breaches of the agreement on the new agreement, the original agreement and any connected agreement must not exceed £15.

More on the default cap can be found in CONC 5A.4.14 below.



CONC 5A.4.12

Rule Summary:

Adds a caveat to CONC 5A.4.10.

Explanation:

If a replacement agreement is effected which replaces an earlier agreement, and the new agreement means that the outstanding amount under the original agreement is repaid earlier as a result, then charges under the agreement which never become payable are not included in the initial cost cap.

Practical Guidance:

Firms must ensure that they are aware of this caveat.



CONC 5A.4.13

Rule Summary:

Relates to the situation where a firm provides funds to a borrower to make repayments or satisfy charges.

Explanation:

If a firm has provided any amounts to a borrower to either make repayments or satisfy charges under a previous agreement, then these amounts should not be included in the calculations of the amount of credit provided.

Practical Guidance:

Firms must be aware of this caveat to the calculation of the amount of credit.



CONC 5A.4.14

Rule Summary:

Explains the default cap.

Explanation:

Firms cannot impose charges for one or more breaches of the agreement (defaults) that total more than £15.

The initial cost cap is also re-stated here.

Practical Guidance:

Firms must ensure that they do not exceed the default cap.



CONC 5A.4.15

Rule Summary:

Reminds firms of a key piece of legislation.

Explanation:

Under section 93 of the Consumer Credit Act 1974, firms must not increase the interest rate on an agreement as a result of a borrower defaulting.

Practical Guidance:

Firms must ensure they do not increase the interest rate in these circumstances.



CONC 5A.4.16

Rule Summary:

Relates to the effect of broker fees on the cost caps.

Explanation:

If a customer pays a fee to a broker that is part of the same group as the peer-to-peer firm, or to a broker that will share its fee with the peer-to-peer firm, then the fee paid to the broker is a charge that needs to be taken into account when determining the level of the total cost cap and the initial cost cap. The agreement providing for the broker fee is considered to be a connected agreement in these circumstances.

Practical Guidance:

Peer-to-peer firms, and brokers that deal with peer-to-peer firms in this way, need to be aware of this.



CONC 5A.4.17

Rule Summary:

Explains the effect of ancillary charges on the cost cap.

Explanation:

Where a firm imposes an ancillary charge, this charge needs to be taken into account when determining the level of the total cost cap, the initial cost cap and the default cap. Unless the ancillary charge is covered in the main credit agreement, then the agreement providing for the ancillary charge is considered to be a connected agreement.

Practical Guidance:

Firms that impose ancillary charges need to be aware of this rule.



CONC 5A.4.18

Rule Summary:

Gives examples of ancillary services for which charges might be made.

Explanation:

Ancillary charges might include processing fees and transmission fees.

Practical Guidance:

Firms need to be aware that this is not an exhaustive list of possible examples.



CONC 5A.4.19

Rule Summary:

Relates to the way interest is calculated.

Explanation:

Firms are not permitted to use compound interest when calculating interest payments under an agreement.

Practical Guidance:

Firms must ensure that they only use the simple interest method.



CONC 5A.5 Consequences of contravention of the cost caps

CONC 5A.5.1

Rule Summary:

Explains to which firms CONC 5A.5 applies.

Explanation:

CONC 5A.5 applies to lenders, peer-to-peer lending firms, debt administrators and debt collectors, in respect of high-cost short-term loans.

Practical Guidance:

These firms must ensure they are familiar with the content of this chapter.



CONC 5A.5.2 & CONC 5A.5.3

Rule Summary:

Explains that an agreement becomes unenforceable if the charge caps are breached.

Explanation:

A credit agreement becomes unenforceable, and the borrower does not have to meet their obligations under the agreement if any of the rules in CONC 5A.2, CONC 5A.3 and CONC 5A.4 are breached by the firm. These rules include the total cost cap (borrowers cannot be asked to repay more in interest and charges than the amount of their loan), the initial cost cap (daily interest rates cannot exceed 0.8%) and the default cap (default charges cannot exceed £15).

In the event that a borrower decides not to meet their obligations as a result of a breach of the rules by a firm, and has informed the firm of this orally or in writing, then within seven days of the notification, the firm must refund all charges paid by the borrower, or confirm to the borrower in writing that no sums need to be repaid.

Once the firm has complied with this requirement, the borrower should repay the credit advanced to them. However, firms should not demand repayment of this sum until a reasonable period has elapsed, and certainly not until 30 days from the day on which the borrower receives the refund of charges mentioned above.

Practical Guidance:

If breaches of the caps occur, firms must comply with these requirements, but better still, firms should ensure they do not breach the cap rules in the first place.



CONC 5A.5.4

Rule Summary:

Clarifies the borrower’s obligations under the above rule.

Explanation:

Once the firm has refunded the charges due to the borrower under CONC 5A.5.2 or CONC 5A.5.3, then the borrower has a statutory obligation to repay the credit advanced to them.

Practical Guidance:

Whilst being aware of this, firms must still ensure they wait for 30 days from making the refund of charges before demanding repayment of this sum.



CONC 5A.5.5

Rule Summary:

Clarifies what might be a reasonable period for the purposes of CONC 5A.5.2 and CONC 5A.5.3.

Explanation:

What constitutes a reasonable period for a firm to wait before demanding repayment of the credit under CONC 5A.5.2 or CONC 5A.5.3 depends on the individual circumstances of the case, and particularly on the repayment terms detailed in the credit agreement.

If an agreement required repayment in instalments, then good practice would be to collect the credit sum due in instalments at the same intervals specified in the agreement. A payment schedule should be issued to the borrower in these circumstances, explaining what sums are due and when.

Practical Guidance:

Firms should ensure they comply with this guidance when it becomes applicable to them.



CONC 5A.5.6

Rule Summary:

Explains the relevance of Treating Customers Fairly to demanding repayment of the credit.

Explanation:

Firms should always consider Principle 6: “A firm must pay due regard to the interests of its customers and treat them fairly’ when collecting any sums due under the rules in CONC 5A.5. This includes considering the financial situation of the borrower before deciding when to demand payment.

Practical Guidance:

Firms should ensure that they treat their customers fairly in these circumstances, and at all other times.



CONC 5A.5.7

Rule Summary:

Clarifies that only charges over and above the caps become void.

Explanation:

If a borrower decides not to fulfil their previous obligations under an agreement because the lender has breached one or more of the cost cap rules, then the only amounts that become void are the charges which the lender has made over and above the permitted levels. So for example, if a £20 default fee is imposed, then only £5 of this was imposed illegally, as the permitted limit is £15.

In these circumstances, the borrower is contractually obliged to repay both the amount of credit provided, plus any charges which were legitimately imposed.

Practical Guidance:

Firms should be aware of this important consideration.



CONC 5A.6 Interpretation

CONC 5A.6.1

Rule Summary:

Defines some of the terms used in chapter 5A.

Explanation:

An ‘ancillary service’ is any service provided in connection with the provision of credit. It includes providing payment protection insurance or any other relevant insurance contract.

Borrower’ includes not just the individual that applies for and is granted the credit, but also any individual providing a guarantee, or any individual to whom the original borrower’s obligations under the agreement are assigned to or passed to under the law.

Charge’ relates to all charges payable under the agreement, including fees and interest payments. It also includes charges payable that are not specified in the agreement, and charges payable by parties who are not subject to obligations under the agreement.

Impose one or more charges on a borrower under an agreement for high-cost short-term credit’ (particularly relevant to CONC 5A.3) includes all of the following actions:

  • Performing duties, exercising rights or enforcing rights on behalf of a lender or peer-to-peer lending firm

  • Taking steps to secure repayment of debts relating to charges

  • Receiving payments in respect of interest repayments due, and passing these payments to a lender

  • Arranging for or instructing another party to take any of the above steps

  • Exercising rights as a lender in such a way that charges can be imposed



Practical Guidance:

Firms must ensure they are aware of how these terms are defined, and when they might be considered to be carrying out any of these actions.



CONC 5A.6.2

Rule Summary:

Clarifies the meaning of ‘impose’ under the above rule.

Explanation:

For the purposes of CONC 5A.6.1, ‘impose’ includes any situation where a firm:

  • Enters into an agreement that contains any clause under which a borrower needs to pay any form of charge

  • Varies or supplements an agreement which leads to any charge being increased and/or the length of time to which any charge applies being increased

  • Adds a charge to a borrower’s account

  • Makes a demand for a charge, or implies in any way that a borrower will be liable for a charge

The above applies to peer-to-peer lending firms as well as lenders.





CONC 6.1 Application

CONC 6.1.1 & CONC 6.1.2

Rule Summary:

Sets out when chapter 6 applies.

Explanation:

Chapters 6.2, 6.5 and 6.7 apply to all lenders.

Chapter 6.3 applies to providers of overdrafts.

Chapter 6.4 and Chapter 6.6 apply to lenders in relation to regulated credit agreements and regulated consumer hire agreements.

Chapter 6.7, from CONC 6.7.17 onwards, applies to peer-to-peer lending firms.

Chapter 6.8 applies to credit brokers.

Practical Guidance:

Firms should familiarise themselves with the sections which apply to them.



CONC 6.2 Assessment of creditworthiness: during agreement

CONC 6.2.1

Rule Summary:

Explains the requirements for re-assessing credit worthiness during an agreement.

Explanation:

As well as assessing creditworthiness before credit is granted, lenders must also repeat this process if during the course of an agreement, a proposal is made to significantly increase the amount of credit to be provided, or the credit limit.

Once again, the firm must consider the customer’s ability to make the required repayments, and consider the potential for the commitments which the agreement entails to have an adverse effect on their financial situation.

The same procedure should be followed as for the initial credit assessment made at application stage, i.e. information is to be gathered from the customer and/or external sources such as a credit reference agency.

Again, the detailed requirements do not apply to credit agreements secured on land, or which are pawnbroking arrangements, or to unauthorised overdrafts or small borrower-lender-supplier agreements

Practical Guidance:

Firms should ensure that a rigorous assessment of creditworthiness takes place when an increase in the amount of credit is being considered. This assessment should be conducted to the same standards as that which was conducted at application stage.



CONC 6.2.2

Rule Summary:

Explains that the requirements of chapter 5.3 still apply to increases in credit

Explanation:

Firms should note that the detailed requirements of chapter 5.3 regarding creditworthiness and affordability still apply when an increase in the amount of credit is being considered

Practical Guidance:

Firms should apply all the relevant rules from chapters 5.3 and 6.2 when considering an application for additional credit



CONC 6.2.3

Rule Summary:

Relates to the need to review sufficient information when conducting credit assessments.

Explanation:

A firm must gather and evaluate such information as is necessary to allow it to carry out a rigorous credit check as required by CONC 6.2.1.

Practical Guidance:

Firms should ensure they gather as much information as possible from the customer themselves, credit reference agencies and other sources.



CONC 6.3 Information to be provided on a current account agreement and on significant overdrawing

CONC 6.3.1 & CONC 6.3.2

Rule Summary:

Explains when chapter 6.3 applies.

Explanation:

Chapter 6.3 applies to firms lending consumer credit, or to those offering current account overdraft facilities where there is a possibility that a customer may go overdrawn without authorisation, or exceed a pre-agreed overdraft limit. However, it does not apply to agreements secured on land.

Practical Guidance:

Firms should establish whether chapter 6.3 is likely to apply to them, and if so should take note of its provisions.



CONC 6.3.3

Rule Summary:

Explains the need to provide certain information to the account holder.

Explanation:

Where a customer enters into an overdraft agreement on a current account, whereby it is possible for them to either go overdrawn without permission or exceed a previously agreed overdraft limit, then the following information needs to be provided to the customer:

  • The rate of interest charged on the amount of unauthorised overdraft

  • Any conditions relating to that interest rate

  • Any reference interest rate on which the overdraft interest rate is based

  • Any changes that many apply to the interest rate stated, including any limited time periods for which the initial interest rate is valid, and details of the procedure the firm will follow for changing the rate

  • Any other charges payable, together with details of the circumstances in which these charges would be levied

Where different rates of interest apply to the overdraft in different circumstances, the disclosure requirements listed above apply separately to each different interest rate

Practical Guidance:

Firms must ensure that all of the information listed above is provided to all customers.



CONC 6.3.4

Rule Summary:

Explains what steps need to be taken when a customer goes significantly overdrawn without agreement.

Explanation:

When a customer either goes significantly overdrawn without authorisation, or significantly exceeds a pre-agreed overdraft limit, and continues to maintain this unauthorised overdraft for at least one month, then the following information must be provided immediately, in writing, to the customer:

  • A statement of the fact that the account is overdrawn, or that the pre-agreed limit has been exceeded

  • The amount of unauthorised overdraft

  • The interest rate charged on the unauthorised overdraft limit

  • Any other charges that apply

For secured credit agreements, these actions should only be taken after the account has been overdrawn for three months, not one month as in other cases.

Note that the word ‘significantly’ is used here, and that this rule will not apply when a customer exceeds an overdraft limit by a small amount, or for a short period. Two examples of what might constitute being ‘significantly’ overdrawn include becoming liable for additional charges which would not apply with lower overdrafts; and the overdraft becoming sufficiently large as to impair the customer’s ability to obtain additional credit of any kind.

Practical Guidance:

Firms should note both the steps which need to be taken in the event of an unauthorised overdraft, and the guidelines as to what might constitute a ‘significant’ overdraft



CONC 6.4 Appropriation of payments

CONC 6.4.1

Rule Summary:

Clarifies when chapter 6.4 applies.

Explanation:

Chapter 6.4 applies to firms engaged in consumer credit lending or hiring.

Practical Guidance:

Lenders and hirers should note the rules set out in this chapter.



CONC 6.4.2

Rule Summary:

Relates to the situation where a customer has two or more outstanding credit agreements with the same firm.

Explanation:

If a customer has two or more outstanding credit agreements with the same firm, and at any stage fails to make sufficient payments to meet their obligations under these agreements, then the firm must allow the customer to decide which of the agreements the part payment will be directed to. For example, a customer can elect to have 100% of their payment directed to one of the outstanding agreements, or can elect to have a certain proportion directed to one agreement and the remainder to another.

If the customer fails to specify which agreement (s) the part payment is intended for, and at least one of the agreements is either a secured loan, a consumer hire agreement, a hire purchase agreement or a conditional sale agreement, then the part payment received must be divided up between the various agreements in the same proportions as the sums outstanding. So for example, if a customer has two agreements, one of which has twice the outstanding balance of the other, then the agreement with the higher value would receive two thirds of the payment made.

Practical Guidance:

Firms must always give the customer a choice as to which agreement (s) any part payments should be made to. Firms should also note the circumstances in which they have an obligation to make this decision themselves.



CONC 6.5 Assignment of rights

CONC 6.5.1

Rule Summary:

Explains who chapter 6.5 applies to.



Explanation:

Chapter 6.5 applies to firms engaged in lending activities

Practical Guidance:

All lenders should familiarise themselves with the content of this chapter



CONC 6.5.2

Rule Summary:

Details some requirements relating to assigning a credit agreement to another party

Explanation:

If a lender assigns the rights to a credit agreement, other than one secured on land, to a second firm, then this second firm must inform the customer via a ‘notice of assignment’. This should be done as soon as is reasonably possible, and certainly on or before the first occasion on which the arrangements for servicing the agreement would change.

An agreement can only be assigned to another firm if the second firm is authorised by the FCA, or if the second firm has an agreement with the company making the assignment under which the second firm will make the notice of assignment.

Practical Guidance:

All lenders considering assigning credit agreements to other parties should be aware of the requirements regarding this.









CONC 6.6 Pawn broking: conduct of business

CONC 6.6.1

Rule Summary:

Sets out when chapter 6.6 applies.

Explanation:

Chapter 6.6 applies to firms engaged in lending and hiring activities.

Practical Guidance:

Lenders and hirers who engage in transactions that would be classed as pawnbroking should familiarise themselves with the content of this chapter.



CONC 6.6.2

Rule Summary:

Highlights sections of the Consumer Credit Act applicable to pawnbroking.

Explanation:

Pawnbroking firms should be familiar with the relevant sections of the Consumer Credit Act as well as the applicable FCA rules. Section 62 concerns the obligation to supply the customer with a copy of the unexecuted credit agreement, Section 63 refers to the obligation to supply the customer with a copy of the executed agreement, Section 64 deals with cancellation rights and section 114 (1) gives firms an obligation to provide the customer with a receipt for an article taken in pawn.

Practical Guidance:

Firms engaged in pawnbroking should ensure they are familiar with these sections of the Act.



CONC 6.6.3

Rule Summary:

Relates to record keeping requirements concerning articles taken in pawn.

Explanation:

Firms must keep records of actions such as:

  • Taking an article in pawn

  • Redeeming an article taken in pawn

  • Selling an article taken in pawn





Practical Guidance:

Firms must ensure they keep comprehensive records of transactions such as these, and that these records can be easily located.



CONC 6.6.4

Rule Summary:

Refers to the level of information to be recorded in respect of the requirements in CONC 6.3.3.

Explanation:

The information contained in the records required in CONC 6.6.3 is explained in CONC 6.6.7 to 6.6.9 below.

Practical Guidance:

Firms should ensure they record all of the required information.



CONC 6.6.5

Rule Summary:

Explains the practice to be followed when records relating to a single pawned article are kept in more than one place/

Explanation:

If records relating to a single pawned article are not all kept together, but in two or more different locations, then the records for each location must show:

  • The date of the credit agreement

  • The reference number of the credit agreement

  • The reference number of the pawn receipt

  • The date the article was taken in pawn

  • The customer’s name

Practical Guidance:

Firms must ensure not only that all of this information is recorded, but that it is available in each location where records of a particular pawnbroking transaction are kept/



CONC 6.6.6

Rule Summary:

Explains for how long pawnbroking records must be kept.

Explanation:

Records of articles taken in pawn must be retained until the later of five years from the date the article was taken, or three years from the date when the article was sold by the firm.

Practical Guidance:

Firms must ensure that records are kept for as long as required by the rules.



CONC 6.6.7

Rule Summary:

Explains the extent of the records to be kept when an article is taken in pawn.

Explanation:

When an article is taken in pawn by a firm, the firm must record:

  • The date of the credit agreement

  • The reference number of the credit agreement

  • The reference number of the pawn receipt

  • The date the article was taken in pawn

  • The customer’s name, postal address and other contact address if applicable

  • The date the redemption period ends

  • The rate of interest applicable to the credit agreement

  • The amount of any charges payable under the agreement



CONC 6.6.8

Rule Summary:

Explains one requirement when an article is redeemed.

Explanation:

If an article taken in pawn is redeemed by the firm, the date of the redemption must be recorded.

Practical Guidance:

Firms must ensure that the date of any redemption is recorded.







CONC 6.6.9

Rule Summary:

Explains the extent of the records to be kept when a pawned article is sold.

Explanation:

If the firm sells the item taken in pawn as a result of default by the customer, the following information must be recorded:

  • The date the item was sold

  • The name and address of any auctioneer involved in the sale

  • The address at which the item was sold (when not sold at auction)

  • The gross receipts from the sale

  • The itemised expenses, if any, arising from the sale

  • The net proceeds from the sale, which are calculated as gross proceeds minus itemised expenses

  • The amount which would have been payable had the article been redeemed instead of being sold

  • If the net proceeds exceed the redemption value, the amount paid to the customer as a surplus payment

  • If the net proceeds are below the redemption value, the amount of the balance, for which the customer still remains liable

  • The date on which any surplus was paid to the customer, if applicable

  • The date on which any outstanding balance (as a result of the sale proceeds being less than the redemption value) was settled by the customer, if applicable

Practical Guidance:

Firms should ensure that all applicable information is recorded



CONC 6.7 Post contract: business practices

CONC 6.7.1

Rule Summary:

Explains when chapter 6.7 applies.

Explanation:

Chapter 6.7 applies to lending activities. 6.7.17 to 6.7.26 also applies to per-to-peer lending companies. In these last ten rules, all references to a lender re-financing a credit agreement also apply to a peer-to-peer company that takes any action which results in an agreement being re-financed.

Practical Guidance:

Lenders and peer-to-peer lending companies must ensure they are familiar with the content of this chapter.



CONC 6.7.2

Rule Summary:

Relates to firms’ obligation to act when a customer experiences repayment difficulties.

Explanation:

Lenders must monitor customers’ payment records continuously, and actively look for evidence that a customer may be experiencing payment difficulties. Where such evidence is identified, the firm should consider how it may be able to assist the borrower before it considers using any formal methods to recover the debt.

Practical Guidance:

Firms should ensure they can quickly identify customers who may be experiencing financial difficulties.



CONC 6.7.3

Rule Summary:

Explains what action might be appropriate in CONC 6.7.2.

Explanation:

If a firm identifies that a customer is experiencing repayment difficulties, some of the actions it may be appropriate to take include notifying them of the risks of failing to repay the debt, such as rising debt levels, increased interest payments or additional charges; and making them aware of sources of free debt advice.

Practical Guidance:

Firms should ensure that information such as this is provided to all customers in difficulty.



CONC 6.7.4

Rule Summary:

Sets out some requirements for the repayment of credit card and store card debt.

Explanation:

If a customer has more than one debt with a credit card provider, repayments received must first be allocated to the debt with the highest rate of interest where this debt is a credit card or store card.



Practical Guidance:

Firms should ensure they follow the correct procedure and allocate repayments to credit and store cards where required.



CONC 6.7.5

Rule Summary:

States the requirements for setting the level of the minimum payment on a credit or store card.

Explanation:

If the agreement was entered into after April 1 2011, then the minimum payment on a credit or store card must be at least sufficient to pay the interest, charges and fees on the account, plus 1% of the outstanding balance.

If interest is calculated over any period in excess of one month, however, then the level of the minimum payment need not take into account any interest applied for any period prior to the current statement.

Practical Guidance:

Firms must ensure they set the minimum payment at a sufficiently high level



CONC 6.7.6

Rule Summary:

Relates to the requirement to allow credit and store card customers to choose the amount they repay.

Explanation:

Credit and store card customers who make automated repayments must be allowed to repay any sum between the minimum payment and the full outstanding balance.

Practical Guidance:

Firms must ensure that customers are given this freedom to choose.



CONC 6.7.7

Rule Summary:

Explains some circumstances in which a credit limit must not be increased.

Explanation:

A firm must not increase a customer’s credit limit on a credit or store card where either the customer themselves has indicated that they do not wish to have the limit increased, or where the customer is in danger of ending up in financial difficulty.



Practical Guidance:

Firms must ensure they do not increase the credit limit in these circumstances



CONC 6.7.8

Rule Summary:

Relates to making offers to increase customers’ credit limits.

Explanation:

All credit and store card customers must be allowed to either accept a lesser increase in their credit limit than the one they have been offered, or to decline this offer altogether.

Practical Guidance:

Firms must ensure that customers’ wishes in this area are respected.



CONC 6.7.9

Rule Summary:

Relates to the notice firms should give of credit limit increases.

Explanation:

Customers should be given 30 days notice before any increase in their credit limit on a credit or store card takes effect. The only permitted exceptions to this are where a customer has requested an increase to their limit, or where the firm has proposed an increase and the customer indicates both that they accept the increase and wish it to come into force in less than 30 days.

Practical Guidance:

Firms should ensure that the required notice is given to all relevant customers.



CONC 6.7.10

Rule Summary:

Relates to increases in interest rates for customers in difficulty.

Explanation:

If a credit or store card customer is at risk of financial difficulties, then the interest rate on their credit or store card must not be increased, unless a promotional discount rate period comes to an end.

Practical Guidance:

Firms must ensure they do not raise rates for customers in difficulty.



CONC 6.7.11

Rule Summary:

Gives the definition for a customer who is at risk of financial difficulty.

Explanation:

A firm should regard a customer as being ‘at risk of financial difficulties’ if any of the following circumstances apply:

  • They are two or more payments in arrears

  • They have agreed an alternative repayment plan with the firm

  • The firm is aware that they are in advanced negotiations with another firm regarding entering into a debt management plan

Practical Guidance:

Firms must ensure they identify customers who fall into these categories, and deal with them according to the specific rules for customers in difficulty.



CONC 6.7.12

Rule Summary:

Relates to the notice firms should give of interest rate increases.

Explanation:

Customers should be given 30 days notice before any increase in their interest rate on a credit or store card takes effect. The only permitted exceptions to this are where a promotional discounted rate comes to an end, or the interest rate tracks an external interest rate such as the Bank of England’s base rate. In the latter circumstances, the fact that the rate will track another rate must have been clearly explained in the credit agreement.

Practical Guidance:

Firms should ensure that the required notice is given to all relevant customers.



CONC 6.7.13

Rule Summary:

Explains certain rights of the customer when an interest rate is increased.

Explanation:

When a firm gives notice under CONC 6.7.12 of its intention to increase the interest rate on a credit or store card, customers must be informed of their rights to:

  • Close their account within 60 days of the notification

  • Pay off the outstanding balance at the rate which applied prior to the rate increase, provided that this is done over a reasonable period

Practical Guidance:

Firms must ensure that customers are informed of their rights under this rule, and that they are permitted to exercise them



CONC 6.7.14

Rule Summary:

Explains that firms cannot increase interest rates arbitrarily.

Explanation:

Firms must have a valid reason for any interest rate increase.

Practical Guidance:

Before implementing any interest rate increases, firms must ensure that they have a genuine reason for effecting the increase.



CONC 6.7.15

Rule Summary:

Gives examples of valid reasons for increasing an interest rate.

Explanation:

Two examples of situations in which a rate increase would be justified are an increase in the cost of providing the credit, and information to suggest that a particular customer now presents an increased risk. Firms must not reach a conclusion that a customer presents an increased risk simply because they have defaulted on repayments on one or two occasions.

Practical Guidance:

Firms should take note of when it might be acceptable to increase rates.



CONC 6.7.16

Rule Summary:

Explains the procedure to be followed when an interest rate is increased based on the risk a customer poses.

Explanation:

Whenever a firm increases the interest rate on the basis that a particular customer is deemed to present an increased risk, then it must inform the customer that the rate has been increased based on their perceived risk. If the customer requests, it must then explain its decision, although this explanation can use generic wording.

Practical Guidance:

Firms must ensure they clearly explain reasons for rate increases to their customers.



(A reminder again at this stage that the requirements of the rest of chapter 6.7 apply both to lenders and to peer-to-peer lending firms as if they were the lender)



CONC 6.7.17

Rule Summary:

Explains some definitions used in the rules which follow.

Explanation:

Re-financing refers to the act of extending the timeframe in which one or more repayments can be made. Common ways this is achieved might be:

  • Replacing one credit agreement with another

  • Issuing a credit agreement that is supplementary to one already in force

  • Varying the terms of an existing credit agreement

  • Making use of powers contained within the terms of a credit agreement

  • Freezing, waiving or deferring payments

To ‘exercise forbearance’ means that a credit agreement is re-financed in such a way that no interest accrues in relation to either that agreement or any agreement which replaces, varies or supplements it. To meet this definition, it must also be the case that any charges do not exceed the costs to the firm of administering the re-financing.

An agreement under which regular payments are required and where a customer simply requests a change to the payment date, say to a different date each month, is not classed as a re-financing unless additional charges or interest are payable as a result of the change

Practical Guidance:

Firms should ensure they are familiar with the wording used in these definitions.



CONC 6.7.18

Rule Summary:

Relates to firms’ obligations to ensure a customer can afford the payments on a re-financed agreement.



Explanation:

A firm must only agree to carry out a re-financing if it believes the customer is able to meet their obligations under the revised or new agreement. This is likely to mean that the firm should carry out a new assessment of affordability prior to approving the re-financing.

Practical Guidance:

Firms must not automatically approve a proposed re-financing, and should ensure they carry out an equally rigorous assessment of whether the customer can afford the repayments as they would when a new agreement is effected



CONC 6.7.19

Rule Summary:

Details the circumstances that must apply in order for a firm to re-finance an agreement.

Explanation:

In order for a firm to re-finance a credit agreement, at least one of the following circumstances must apply:

  • The firm exercises forbearance in doing so, in such a way that meets the definition of this in CONC 6.7.17

  • The customer has requested a re-financing

  • The firm has obtained the customer’s consent to carry out the re-financing

The firm must also be satisfied that to carry out a re-financing would not be contrary to the customer’s best interests.

Practical Guidance:

Firms should satisfy themselves that the above applies before carrying out a re-financing.



CONC 6.7.20

Rule Summary:

Details information to be provided by the firm when high cost short-term credit is re-financed.

Explanation:

When a firm proposes to re-finance a payday loan or any other arrangement which meets the FCA’s definition of high cost short-term credit, it must give the customer an information sheet.

This sheet must contain information about the consequences of failing to repay on time, tips for managing debts, discussing options with the lender and seeking out sources of free debt advice. This must be done using the exact wording contained in this rule.

Slightly different wording is required in some of the areas where the agreement to be re-financed is a peer-to-peer loan.

Practical Guidance:

Firms must ensure that they provide the required information, using the correct wording, when re-financing loans of this type.



CONC 6.7.21

Rule Summary:

An important restriction on the re-financing of high cost short-term credit.

Explanation:

A firm must not re-finance a payday loan or any other arrangement which meets the FCA’s definition of high cost short-term credit if doing so would leave the customer with repayment obligations which were either unsustainable or otherwise detrimental to their financial situation.

Practical Guidance:

Firms should take great care that any re-finance of a payday loan or similar is in the best interests of the customer.



CONC 6.7.22

Rule Summary:

Relates to granting consecutive high cost short-term credit agreements.

Explanation:

A firm should not grant one payday loan or similar arrangement to a customer immediately after another agreement has ceased if the cumulative effect of the two agreements together would mean that the customer is faced with an unsustainable commitment.

Practical Guidance:

Firms must consider whether requiring a customer to repay two payday loans or similar arrangements in quick succession would cause them difficulties in meeting repayment obligations.



CONC 6.7.23

Rule Summary:

Relates to restrictions on re-financing of high cost short-term credit agreements.

Explanation:

A firm must not re-finance a customer’s payday loan or other high cost short-term credit agreements on more than two occasions, unless they do so in a way which meets the definition of ‘exercising forbearance’ explained in CONC 6.7.17, i.e. that no interest accrues and no additional charges are payable as a result of the re-financing.

Practical Guidance:

Firms must ensure they do not re-finance (roll over) a payday loan or similar arrangement on more than two occasions.



CONC 6.7.24

Rule Summary:

Relates to amendments to continuous payment authority (CPA).

Explanation:

A firm cannot change the terms of a CPA unless they have both obtained the consent of the customer to do so and have explained the reasons for the change in terms to the customer.

Practical Guidance:

Firms should ensure that they carry out both of these steps before amending any existing CPA.



CONC 6.7.25

Rule Summary:

Explains when amendments may still be made to CPAs, in spite of CONC 6.7.24.

Explanation:

A firm may amend the terms of a CPA if this is done under a variation clause in the agreement to which the customer has previously given their consent. Again the reasons for the change need to be explained to the customer.

A CPA may also be amended if the change involves repayments being waived or reduced, and the details of this are explained to the customer.

Practical Guidance:

Before amending the terms of a CPA, firms must ensure that the circumstances described in this rule or in CONC 6.7.24 apply.



CONC 6.7.26

Rule Summary:

Relates to requests to a payment service provider.

Explanation:

When payments are made to a payment service provider, the firm must ensure they use the correct category code and identifier.

Practical Guidance:

Firms should check these details before they make contact with the payment service provider.



CONC 6.8 Post contract business practices credit brokers

CONC 6.8.1

Rule Summary:

Explains who chapter 6.8 applies to.

Explanation:

Chapter 6.8 applies to all credit brokers.

Practical Guidance:

Brokers should ensure they familiarise themselves with the content of this chapter.



CONC 6.8.2

Rule Summary:

Relates to a broker taking on responsibility for providing information to the customer.

Explanation:

If a broker has responsibility for giving information (e.g. a credit agreement) to a customer or receiving information from a customer on the lender’s behalf, then the brokerage firm must ensure they are familiar with the requirements and that they have processes in place to meet these requirements. Examples of the requirements this rule refers to include those in chapter 4.2.

Practical Guidance:

Firms should ensure that they provide the necessary information when they act on a lender’s behalf in this way, and should ensure they have systems to ensure that all the necessary information is provided.



CONC 6.8.3

Rule Summary:

Relates to refunds of broker fees to customers.

Explanation:

If a broker introduces a customer to a credit provider, and six months after the date of that introduction the customer has still not entered into a credit agreement, then the customer has the right to request a refund of any fee which they have paid to the broker (less an administration fee of £5).

If no broker fee has been paid by the time this six month period elapses, then the brokerage firm must not ask that such a fee is paid.

Refund requests must be accepted in these circumstances, regardless of the reasons as to why no credit agreement has been entered into.

Any sum paid by the customer to the broker which would be included in the ‘total charge for credit’ calculation is covered by this rule, even if the firm did not describe the payment as a fee or a commission payment.

This rule also applies when a customer exercises a right to withdraw from a credit agreement. In these circumstances, any broker fees paid must also be refunded on request.

This rule relating to refunds does not apply to regulated mortgage contracts or home purchase plans where the brokerage firm is an FCA authorised firm or an appointed representative.

Practical Guidance:

Firms should ensure that they fully understand the circumstances in which a fee is refundable.





CONC 6.8.4

Rule Summary:

Explains that firms must respond to refund requests.

Explanation:

Where the circumstances explained in CONC 6.8.3 apply, and such a request is received from a customer, firms are obliged to respond to the request.

Practical Guidance:

Firms must ensure they respond to all such requests.



CONC 6.8.4A/B

Rule Summary:

Explains that firms need to make customers aware of their right to claim a refund.

Explanation:

If a customer is entitled to a refund because no loan has been arranged, firms must inform the customer of their right to claim a refund within five working days of the expiry of the relevant six month period.

Practical Guidance:

Firms must ensure they make customers aware of their refund rights.







CONC 6.8.5

Rule Summary:

Explains some other requirements regarding refunding broker fees.

Explanation:

The customer does not need to make specific mention of their rights under section 155 of the Consumer Credit Act, they just need to mention in some way that they would like a refund of their broker fee in order for the rules of this chapter to apply.

Requests for refunds should be dealt with promptly.

Firms should refund fees earlier than the six month deadline referred to in CONC 6.8.3 if it becomes clear at any point that the customer will not be entering into a credit agreement before the six month period expires.

Practical Guidance:

Firms must ensure they meet all of these requirements.

Analysis of the consumer credit rulebook

The Financial Conduct Authority (FCA) took over as regulator of consumer credit on April 1 2014. Consequently, all credit firms should now be complying with the rules set out in the Consumer Credit (CONC) section of the FCA’s Handbook.

The CONC sourcebook contains 15 sections:

Chapter

Content of chapter

Page number

CONC 1

Application and purpose and guidance on financial difficulties

1

CONC 2

Conduct of business standards: general

4

CONC 3

Financial promotions and communications with customers

32

CONC 4

Pre-contractual requirements

61

CONC 5

Responsible lending

83

CONC 6

Post contractual requirements

115

CONC 7

Arrears, default and recovery (including repossessions)

136

CONC 8

Debt advice

191

CONC 9

Credit reference agencies

213

CONC 10

Prudential rules for debt management firms

215

CONC 11

Cancellation

221

CONC 12

Requirements for firms with interim permission for credit-related regulated activities

228

CONC 13

Guidance on the duty to give information under sections 77, 78 and 79 of the Consumer Credit Act 1974

230

CONC 14

Requirement in relation to agents

233

CONC 15

Second charge lending

235



Here we look at the CONC provisions in detail and what they mean for firms. The format used in this guide is:

  • Rule Summary – what the rule relates to

  • Explanation – more detail on the content of the rule

  • Practical Guidance – what firms need to do in respect of the rule

Top of Form

CONC 1.1 Application and purposeBottom of Form

CONC 1.1.1



Rule Summary:

A legal statement setting out that the CONC provisions apply to consumer credit activities.

CONC 1.1.2 & 1.1.3 & 1.1.4

Rule Summary:

Firms must comply with CONC and with all other relevant rules and legislation.

Explanation:

These three sections remind firms that the CONC sourcebook is not the only one whose provisions they need to be aware of. They also need to comply with the FCA rules on supervision, systems & controls, complaints handling and handling of client monies. They need to comply with the FCA’s General Provisions, which cover areas such as fees, status disclosure and use of the FCA logo; and they need to comply with the Principles for Business, the most important of which are repeated here. Finally, firms are reminded that the Consumer Credit Act is still in force, and that its requirements still apply.

Practical Guidance:

Firms should be aware of the scope of the legislation they need to comply with, and have a comprehensive compliance monitoring plan in place to ensure they meet their obligations.Top of Form

CONC 1.2 Who? What? Where?

Bottom of Form

CONC 1.2.1

Rule Summary:

The CONC rulebook applies not just to activities which have traditionally been thought of as credit activities but also to operation of a peer-to-peer lending firm.

Explanation:

Highlights that peer-to-peer lending activities fall under the FCA’s consumer credit regime, even though they were not previously regulated by the Office of Fair Trading (OFT). All areas for which a Consumer Credit Licence was required are now regulated by the FCA.

Practical Guidance:

All firms who come under the scope of the new rulebook, including peer-to-peer lending firms who were not regulated by the OFT, need to be aware of the regulatory environment they now operate in.

CONC 1.2.2

Rule Summary:

Regulated firms are responsible for the actions of all parties who act as their agents.







Explanation:

It goes without saying that a firm is responsible for ensuring it complies with the rulebook. However, if they use third parties to provide services on their behalf, such as compliance consultants, marketing agencies, accountants etc, they cannot hold them accountable if their services are not compliant with the rules. Likewise, if a regulated firm’s financial advisers operate on a self-employed basis, the advisers are considered to be agents of the regulated firm and the firm is still responsible for their actions. The buck stops with the regulated firm.

Practical Guidance:

Firms need to carry out comprehensive due diligence on any third party they are considering outsourcing the provision of a service to. They need to have a robust system in place to ensure that any advisers who work on a self-employed basis operate in a compliant manner.

CONC 1.2.3

Rule Summary:

The FCA will consider the actions of an appointed representative (AR) to be the actions of the principal firm.

Explanation:

The principal firm – the regulated firm that agrees to take on the appointed representative – will be held responsible for any failings in the representative’s activities.

Practical Guidance:

A firm considering taking on an AR must first carry out stringent checks to ensure that they are fit and proper. They need to check that the AR firm is financially stable, and to follow a similar recruitment process as they might when recruiting a member of staff. Is the firm the type of firm they want to have within their business? Are the key individuals from the AR firm trustworthy, and do any of them have previous convictions, upheld complaints, disciplinary action or credit defaults?

Once an AR has been accepted, their activities need to be closely monitored. In addition to the usual compliance monitoring activities, such as reviews of business sold, their accounts need to be regularly scrutinised, and the principal needs to consider and mitigate any risks that the AR poses.



CONC 1.2.4

Rule Summary:

A list of the credit-related activities which are regulated by the FCA.

Explanation:

The FCA regulates lending, credit broking, debt management (counselling or adjusting), debt collecting, debt administration, providing credit information services, acting as a credit reference agency, consumer hire and operating a peer-to-peer lending firm.

Practical Guidance:

As there are some differences between which firms required an OFT consumer credit licence and which require FCA credit authorisation, if in any doubt prospective new credit firms should make absolutely sure of whether they need FCA authorisation or not. Examples of differences include a wider definition of what constitutes credit brokerage under the FCA regime; and that some firms who are supervised for credit activities by another professional body may not need FCA authorisation.

CONC 1.2.5

Rule Summary:

Firms are subject to the provisions of CONC if they are a UK resident, even if the service is provided by a related entity of the firm that is based outside the UK.

Explanation:

If an overseas subsidiary of a firm deals with a UK-based client, the consumer credit rules still apply. CONC 3, which is referred to here as an exemption, refers to the rules on financial promotions.

Practical Guidance:

If firms have overseas subsidiaries or other associated firms based abroad, they need to ensure that a robust system is in place to ensure that these associated firms comply with their obligations. This may involve an in-house compliance operation at the overseas subsidiary, or it may involve staff from the parent firm visiting the subsidiary to carry out monitoring activities.

CONC 1.2.6

Rule Summary:

Firms based in European Economic Area (EEA) countries other than the UK are not regulated by the FCA, but UK-based companies providing services in other EEA countries are.

Explanation:

Companies whose headquarters are in other countries in the EEA are unlikely to be regulated by the FCA – unless they have a UK subsidiary, in which case the UK subsidiary may hold an FCA authorisation. The regulatory system of their home state is likely to apply instead. UK-based companies are expected to ensure the same standards are maintained when dealing with clients based overseas. The EEA comprises all member states of the European Union, plus Iceland, Liechtenstein and Norway.

Practical Guidance:

Firms who have a presence in countries other than the UK must understand when the rules apply and when they do not.

Top of Form

CONC 2.1 Application

Bottom of Form

CONC 2.1.1

Rule Summary:

A purely legal statement.

Top of Form

CONC 2.2 General principles for credit-related regulated activities

Bottom of Form

CONC 2.2.1

Rule Summary:

Explains that this section applies to regulated credit firms.

CONC 2.2.2

 

Rule Summary:

Explains firms’ obligation to treat customers fairly and gives some examples.

Explanation:

Examples of what would constitute failing to treat customers fairly are given, including: marketing credit agreements to customers which are not suitable for them, high pressure selling, not treating customers responsibly when they fall into arrears and using re-possession as anything other than a last resort. This is of course not an exhaustive list and there could be many other practices which the FCA could regard as a breach of Principle 6. Reference is made here to several sets of OFT guidance: the Irresponsible Lending Guidance, the Second Charge Lending Guidance, the Credit Brokers and Intermediaries Guidance and the Debt Management Guidance. Similar references are made throughout the rulebook.

Practical Guidance:

Treating Customers Fairly’ is an extremely wide definition, and a review of recent disciplinary action taken by the FCA shows the number of different scenarios in which the regulator considers that firms have been treating their customers unfairly. Firms should note the six TCF outcomes set out by the FCA, and consider whether their procedures and practices allow these outcomes to be satisfied. Where they do not, firms should make changes as a matter of priority.

The six TCF outcomes are:

  • Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture

  • Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

  • Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.

  • Where consumers receive advice, the advice is suitable and takes account of their circumstances.

  • Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.

  • Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

CONC 2.2.3 & CONC 2.2.4

Rule Summary:

 

Firms must not use misleading trading names.







Explanation:

Rules of this nature will be familiar to firms previously regulated by the OFT. Firms must not use trading names that suggest they are a charity or helpline if they are actually providing a commercial service. Using names such as Loans For All or Speedy Money, that suggest something about the service that will be provided, should not be used unless the claims can be substantiated. In this context, website addresses and domain names are counted as being trading names. Reference is made in this section to part of the Consumer Credit Act.

Practical Guidance: 

Firms should keep a log of all trading names that they use and the dates when they were used. Before adopting any trading name, firms must ensure that the name is not misleading in anyway.

CONC 2.2.5



Rule Summary:

Explains that other areas of the FCA rulebook and the law still apply.

Explanation:

The FCA has introduced a comprehensive set of rules for firms to follow in this CONC sourcebook. However, firms still need to comply with the relevant sections of other parts of the FCA Handbook, such as the Principles for Business; and still need to comply with relevant legislation such as the Consumer Credit Act, the Consumer Protection from Unfair Trading Regulations, the Unfair Terms in Consumer Contracts Regulations and the Enterprise Act.

Practical Guidance:

Firms need to have robust systems in place to ensure they comply with all relevant rules and legislation.

Top of Form

CONC 2.3 Conduct of business: lenders and restrictions on provision of credit card chequesBottom of Form

CONC 2.3.1

Rule Summary:

Explains that this section applies to regulated credit firms.

CONC 2.3.2

Rule Summary:

Firms are required to explain the key features of credit agreements to clients

.

Explanation:

The key features of credit agreements are things such as: the name and address of the lender, the name and address of the borrower, the policy number, the amount borrowed, the term of the agreement, the required repayments and how often they need to be made, the total charge for credit including fees, the Annual Percentage Rate, the consequences of missed payments, cancellation rights and how to make a complaint.

Practical Guidance:

If a firm is giving advice, all advice must be suitable for the customer’s needs and circumstances. If not giving advice, it must still provide sufficient information to allow the customer to make an informed choice as to whether to proceed with any product they are considering. Firms should ensure that customer-facing staff know what explanations need to be provided.

CONC 2.3.3

Rule Summary:

Firms should monitor the repayment records of all borrowers, and take action where appropriate.



Explanation:

Firms must monitor the repayment record of all borrowers, and make contact with those who fail to meet their obligations as set out in the credit agreement.

Practical Guidance:

A firm should have the systems and controls in place so that it can identify customers with repayment difficulties at the earliest opportunity. Borrowers in financial difficulty must be treated fairly, and every effort must be made to provide a suitable solution to their difficulties, such as agreeing an alternative repayment structure, before more formal debt collection methods are used.

CONC 2.3.4

Rule Summary:

Firms must ensure that any brokers they deal with are themselves FCA authorised.

Explanation:

Lenders and other credit firms sometimes deal with credit brokers – say a lender might sell their loans through a broker. Any such broker must be either authorised by the FCA, or be an appointed representative of an authorised firm, and it would be the lender’s responsibility to check this.

Practical Guidance:

A firm may pass client information to credit brokers, or receive leads from them. If it deals with brokers in any way, it must be satisfied that they are also authorised by the FCA. This can be checked on the Financial Services Register and the Consumer Credit Interim Permissions Register.

CONC 2.3.5

Rule Summary:

Sets out the circumstances in which firms can provide credit card cheques to customers.

Explanation:

Credit card cheques can only be provided to customers who have asked for them. Only one issue of cheques can be provided in respect of each request, and up to three cheques can be provided in each of these issues.

Practical Guidance:

Firms should have systems in place for ensuring that they comply with these requirements, and for ensuring that staff are aware of the restrictions in this area.

Top of Form

CONC 2.4 Credit references: conduct of business: lenders and ownersBottom of Form

CONC 2.4.1

Rule Summary:

Explains that section 2.4 applies only to lenders and consumer hire firms

Practical Guidance:

Lenders and hire firms must ensure they are familiar with the rules in this chapter

CONC 2.4.2

Rule Summary:

Relates to a lender’s responsibilities to inform credit reference agencies when they decline applications made via brokers.



Explanation:

Before the lender informs a broker that it has rejected a client’s application for credit, it must either inform the customer directly of this rejection; or alternatively must give the broker contact details of any credit reference agency it has used to seek information about the applicant. The SI reference in the rulebook here is to the Consumer Credit (Conduct of Business) (Credit References) Regulations

Practical Guidance:

Firms need to have systems in place to ensure that they comply with these obligations, and that all relevant staff are aware of the requirements.

CONC 2.4.3

Rule Summary:

Firms should not carry out credit searches in respect of potential customers who have not yet decided whether to go ahead.

Explanation:

Credit reference agencies should only be used to source information about customers once they have applied. It is not acceptable to carry out a credit search if they have just made an enquiry about credit.

Practical Guidance:

Firms should have arrangements in place to allow potential customers to obtain quotations as to the likely cost of credit before they make any decisions. All relevant staff need to know that credit searches can only be performed on those who make an application.

Top of Form

CONC 2.5 Conduct of business: credit brokingBottom of Form

CONC 2.5.1

Rule Summary:

Confirms that this section relates to credit brokerage firms.

Practical Guidance:

All brokers need to confirm they are aware of the rules in this chapter.



CONC 2.5.2

Rule Summary:

Confirms the scope of the rules in section 2.5.

Explanation:

This section applies to all credit agreements and consumer hire agreements, even those that are exempt under the Regulated Activities Order

Practical Guidance:

Firms should ensure that they have compliance procedures in place to cover all credit agreements and consumer hire agreements



CONC 2.5.3

Rule Summary:

This relates to obligations to explain credit agreements and to ensure suitability of advice, and to data protection obligations.





Explanation:

Customers must always be given a reasonable time to consider a credit agreement or consumer hire agreement before committing to a loan. Where the broker offers advice, any recommended products need to be suitable for the client’s needs and circumstances.

Where a customer’s details are to be passed to a third party, their consent for this must be obtained, and it must be explained to them why their details are being passed on.

If customer details are gathered for the purposes of making an introduction to another firm, and that firm is linked to the first firm, then the first firm must explain the association to the customer.

As regards customers’ personal data, firms must inform customers of how their data is used, allow customers to cancel processing of their data if they so wish, inform customers who enquire of where their data was obtained from and ensure that data is not passed to non-regulated firms

Practical Guidance:

Firms must ensure that they give all of their customers adequate time to consider their proposed agreements. Where advice is given, advisers must understand the standards expected of them, and there should be robust systems in place for monitoring the quality of advice. Firms must be conversant with the Data Protection principles and ensure all data is handled in accordance with these.



CONC 2.5.4

Rule Summary:

Makes reference to use of privacy notices.

Explanation:

Provision 6 of CONC 2.5.3 requires firms to inform customers of how their personal data will be used. One way of doing this is to issue them with a privacy notice.

Practical Guidance:

Firms who make use of privacy notices must ensure they comply with the Privacy Notice Code of Practice of the Information Commissioner’s Office (ICO). This Code and an example of the format of a privacy notice can be found on the ICO website.



CONC 2.5.5

Rule Summary:

Relates to informing the customer of any credit reference agencies used.

Explanation:

If a broker makes use of a credit reference agency during the course of their dealings with clients, and has conducted negotiations on the client’s behalf at any stage, they must inform the client of the name and address of this agency.



Practical Guidance:

Firms must ensure all client-facing staff are aware of this requirement, and have systems in place for checking that it is carried out.



CONC 2.5.6

Rule Summary:

Relates to informing the customer of any credit reference agencies used

Explanation:

If a broker makes use of a credit reference agency during the course of their dealings with clients, and has not conducted negotiations on the client’s behalf at any stage, they must inform the client of the name and address of this agency within seven days should the client request these details.

Practical Guidance:

Firms must ensure all client-facing staff are aware of this requirement, and have systems in place for checking that it is carried out.



CONC 2.5.7

Rule Summary:

Credit searches must not be carried out before applications are made

Explanation:

Because of the damage to a credit file that can be left by carrying out a credit search, brokers must not carry out such a search for a customer who is simply shopping around and who has not yet made a decision to apply. Firms should instead have appropriate ‘quotation search’ facilities to allow customers to ascertain the cost of credit were the loan to be taken via them.

Practical Guidance:

Firms must ensure that all relevant staff know that credit searches should only be carried out on applicants.



CONC 2.5.8

Rule Summary:

A comprehensive list of what are considered to be ‘unfair business practices’.

Explanation:

Firms must not make unsolicited calls to people who appear on the Telephone Preference Service register, or to those who have requested not to receive marketing calls. The only exception is for existing customers who have consented to receiving such calls, and who have been given the opportunity to opt out of receiving such calls.

Firms must not use automated calling systems or send electronic communications (e.g. text, email) to anyone who has requested not to use such systems.

A firm’s employees or agents must not make contact at unreasonable hours (including any time of day which would normally be considered ‘social’ hours, but for which they have reason to suspect might constitute ‘unsocial’ hours for a certain customer)

A broker firm’s employee or agent must leave a customer’s home immediately if they are requested to do so.

Firms must not make inappropriate use of premium rate telephone numbers, including keeping a customer on the line for an unduly long time when they have made the call.

Firms must not offer inappropriate inducements to complete a credit application quickly.

Firms must not refer clients to other parties when they clearly do not meet that other party’s lending or hiring criteria.

Firms must not suggest to customers that an application will be approved for the full amount when a lower amount may actually be offered; or grant more credit than has been requested when this is not in the customer’s interests and is done for personal gain.

Firms must not favour the products of one lender over another when this is not in the customer’s interests and is done for personal gain.

Firms must not exert pressure on customers to purchase payment protection or other insurance products, or offer undue incentives to do so. Firms must not discourage customers from purchasing such insurance from another firm.

Firms must not encourage customers to take out secured credit to replace unsecured credit where this is not in the customer’s interests.

Firms must not encourage customers to increase, refinance or consolidate their debt if this would lead to the required repayments becoming unaffordable.

Firms must not encourage customers to take out additional credit, or extend the term of a credit agreement, unless this is in the customer’s interests.

Firms must not accept remuneration from clients for making introductions to firms offering types of credit that are different to the type they are seeking, unless the customer consents to this. Firms must also not take fees from client bank accounts without the client’s permission.

Firms must not pass customer data to third parties if consent has not been obtained, or if the purpose of passing on the data is different than the reason stated when consent was sought.

Practical Guidance:

A great deal here for firms to take note of. But any responsible brokerage firm will hopefully agree that the activities listed constitute unfair practice.









CONC 2.5.9

Rule Summary:

Additional guidance on what constitutes unfair practice. In some areas the rulebook is worded so as to give examples of good practice, and in others to give examples of bad practice.

Explanation:

Suggesting that an offer of credit may be withdrawn, or offered on inferior terms if the customer delays signing an agreement, is likely to be an ‘inappropriate inducement’ to conclude a deal quickly.

Unfair use of premium rate phone lines is likely to include specifying a premium rate number to make a complaint or request a refund, or keeping a customer who has phoned in on the line for longer than 15 minutes.

Fees payable, or at least an indication of the basis on which fees will be calculated, should be disclosed to the customer at the start of the client relationship, or as soon as practical thereafter. The information should be provided in a ‘durable medium’, i.e. a format that the customer can refer back to at a later date, such as in writing or by email. Oral disclosure does not constitute a durable medium.

If a firm makes an introduction to another firm for a type of credit that is different to the type the customer was seeking, at the same time as the customer’s consent is obtained, the risks and key features of that form of credit should be explained.

Firms should seek the customer’s consent to pass data to third parties wherever practical, even though in limited circumstances the Data Protection Act allows this to be done without consent. An example of inappropriately passing personal data without consent would be giving it to a claims management company in exchange for a fee.

Practical Guidance:

Again, hopefully responsible brokers already agree that the examples given are either good or poor as appropriate. But all firms should take note of these examples and consider how they can be applied in their firms.



CONC 2.5.10 & 2.5.11

Rule Summary:

Clarification of the insurance definitions used in CONC 2.5.8

Explanation:

Payment protection insurance (PPI) is a short-term product which either pays the loan repayments in certain circumstances, usually accident, sickness or unemployment; or under which payments are suspended in certain circumstances. Debt waiver and debt freeze fall under this definition of PPI.

Short-term income protection is insurance which pays a pre-determined amount directly to the policyholder in the event of accident or sickness, for a term not exceeding five years.

Practical Guidance:

Firms should ensure they are conversant with these definitions.



CONC 2.6 Conduct of business: debt counselling, debt adjusting and providing credit information services

CONC 2.6.1

Rule Summary:

Clarifies that this section refers to debt counsellors, debt adjusters and providers of credit information services.

Practical Guidance:

These types of firm should ensure they are familiar with the rules in this chapter.



CONC 2.6.2

Rule Summary:

Refers to handling of personal data

Explanation:

Firms must inform customers of how their personal data will be processed

Practical Guidance:

Firms need to ensure that all customers are informed of this





CONC 2.6.3

Rule Summary:

A list of what are considered to be ‘unfair business practices’

Explanation:

Firms must not exert pressure when attempting to sell its services, or take advantage of a customer’s lack of understanding of credit in order to do so.

Firms must not visit customers, or make appointments to do so, at unreasonable hours (including any time of day which would normally be considered ‘social’ hours, but for which they have reason to suspect might constitute ‘unsocial’ hours for a certain customer). Visits must also not be unduly long in duration.

A firm’s employee or agent must leave a customer’s home immediately if they are requested to do so, and must comply with any requests not to return.

If a customer calls in on a premium rate number, firms must not keep them on the line for an unduly long period.

Practical Guidance:

A few important things for firms to note here. But any responsible firm will hopefully agree that the activities listed constitute unfair practice.



CONC 2.6.4

Rule Summary:

Guidance on what constitutes unfair practice

Explanation:

Firms cannot promote their services away from their own premises, such as by making unsolicited visits to people’s homes.

Firms should ensure that customers do not ring in on premium rate phone lines where the conversation is likely to take more than 15 minutes. It is considered unlikely that any call made to a firm concerning debt adjusting, debt counselling or credit information services should last longer than 60 minutes, and that any call from a customer simply to check the status of their case should last longer than five minutes.

Practical Guidance:

Firms should ensure that their canvassing activities are conducted from their own premises, and comply with section 153 of the Consumer Credit Act. They should ensure that customers are not kept on the phone for unduly long periods, and certainly not for longer than the periods specified in this section of the rulebook.







CONC 2.7 Distance marketing

CONC 2.7.1

Rule Summary:

Sets out when the provisions of this section apply

Explanation:

Except for consumer hire firms and professional firms, this section applies to any UK-based firm that conducts activities with remotely-based customers, even if they are not based in the UK but in other countries of the European Economic Area.

Practical Guidance:

Firms should ascertain if the distance marketing rules are likely to apply to them, and ensure they are aware of the requirements if they do.



CONC 2.7.2

Rule Summary:

Sets out when the distance marketing rules apply, and when they do not

Explanation:

The distance marketing rules under the Distance Marketing Directive are set out in Annex 1 to Chapter 2 of CONC. These set out 20 disclosure obligations for firms to follow when offering distance contracts. Distance contracts involve the sale of a product or the provision of a financial service under a dedicated process for providing this remotely, and where there is no physical meeting between the firm and the customer at any stage. However, many of the 20 obligations do not apply to many payment services agreements and credit agreements.

Practical Guidance:

Firms who conduct business remotely must ensure they know the requirements of the distance marketing rules, and when it applies and when it doesn’t. A one-off sale made via telephone, internet or postal means will not fall under the distance marketing rules if the firm usually offers its services on a face-to-face basis.



CONC 2.7.3

Rule Summary:

Sets out high-level requirements for how the distance communications must be made

Explanation:

Firms must start by explaining why it is necessary to provide all of the distance marketing information. It must be provided in a clear and understandable way that is appropriate to the distance communication method being used.

Practical Guidance:

Firms will be familiar with the FCA’s Principle 7, which requires firms to communicate with their clients in a way which is clear, fair and not misleading. This rule echoes similar sentiments. Firms must consider the best way of communicating the required information given the method of communication they are using.



CONC 2.7.4

Rule Summary:

Sets out what needs to be said at the start of a telephone call

Explanation:

A firm must identify itself at the start of a telephone call made for the purposes of concluding a contract at a distance. It must also commence by making clear the purpose of the call.



Practical Guidance:

Firms need to start telephone calls by giving their firm name and by making it clear that the call is in connection with the provision of a financial service.



CONC 2.7.5

Rule Summary:

Relates to contractual disclosure obligations

Explanation:

All information which firms are contractually obliged to disclose prior to the commencement of a contract must still be disclosed under a distance contract.

Practical Guidance:

Firms must ensure that any information they are legally obliged to disclose before they commence a face-to-face relationship with a client is still disclosed before the start of a distance relationship.



CONC 2.7.6

Rule Summary:

Sets out the ‘durable medium’ requirement

Explanation:

All required distance marketing information needs to be provided in a durable medium, i.e. a format that the customer can refer back to.

Practical Guidance:

Firms must ensure that all disclosure requirements are executed via a durable medium. Simply giving the information via telephone would not be acceptable, except in the unlikely event that a recording of the call was then sent to the customer. A letter, written disclosure document or email that a client can refer back to would meet the requirement. (But see the comments on CONC 2.7.11 below for details of disclosure requirements in telephone communications).



CONC 2.7.7

Rule Summary:

Two very different topics – the exemption for consumer hire and the need for a firm to communicate information even if another firm does it on its behalf.

Explanation:

The distance marketing rules do not apply to consumer hire agreements, but the Consumer Protection (Distance Selling) Regulations 2000 do apply.

Where one firm acts on behalf of another, and the agent provides the required contractual information, the principal firm must also do so.

Practical Guidance:

Consumer hire firms must ensure they are aware of the Consumer Protection (Distance Selling) Regulations 2000, and that they comply with them.

Firms must disclose the required information to their customers in all circumstances. For example, a lender must provide the required information to their customers even if a customer uses a broker who also provides it.



CONC 2.7.8

Rule Summary:

Relates to when a distance marketing contract may begin

Explanation:

A contract concluded at a distance may only commence when the customer gives their approval for this to happen

Practical Guidance:

Firms must ensure that contracts do not commence until customer approval has been obtained



CONC 2.7.9

Rule Summary:

Sets out that the rules only apply to an initial agreement

Explanation:

Where an initial service agreement is drawn up between the firm and the customer, and subsequent dealings are of the same nature as the initial dealings, then only the initial dealings are subject to the distance marketing rules.

Practical Guidance:

Firms must consider carefully whether their subsequent dealings with a distance customer are of the same nature as those outlined in their initial service agreement. Only if they can satisfy themselves of this can they disregard the distance marketing requirements at a later stage.



CONC 2.7.10

Rule Summary:

Sets out when the distance marketing rules apply when there is no initial agreement



Explanation:

When no initial service agreement exists between the firm and the customer, the distance marketing rules apply when the first task is performed. If this initial task is not repeated within the first 12 months of the relationship, then the rules will apply again when the task is performed again.

Practical Guidance:

Firms should identify when tasks are repeated and how long it has been since the task was last performed, and should thus be able to work out when to re-apply the distance marketing rules.







CONC 2.7.11

Rule Summary:

Explains the exemption to the distance marketing disclosure requirements for telephone-based communications

Explanation:

If communications regarding a distance contract are talking place via telephone, then the firm can seek the customer’s consent to only provide limited disclosure information during the call – such as the name of the caller, a description of the service offered, price information, tax information and cancellation rights – with the remaining information to follow in a durable medium before the contract is concluded. The firm must state during the call that additional information is available on request.

Practical Guidance:

Firms who decide not to give all the required disclosure information during a telephone call must ensure that firstly they give the limited information they have to, secondly that they seek the customer’s consent to proceed on the basis of that limited information, and thirdly that all of the required disclosure information is then provided in a durable medium in good time before the conclusion of the contract.



CONC 2.7.12

Rule Summary:

Sets out an exemption to the need to provide the disclosure information prior to conclusion

Explanation:

If a customer requests that a contract is concluded via a method that does not allow all of the required information to be provided in a durable medium, then it will suffice to provide the information in a durable medium immediately that the contract concludes.





Practical Guidance:

This situation is perhaps most likely to arise where a customer insists on concluding a contract in a telephone call. The required information must then be posted, emailed or provided in another durable medium as soon as possible after the contract is concluded.



CONC 2.7.13

Rule Summary:

Explains the approach to be followed when a contract includes both payment and non-payment elements

Explanation:

We have already seen in CONC 2.7.2 that payment services contracts are exempt from the distance marketing rules. But if a contract contains elements of both payment and non-payment services, then the exemption is only applicable to the payment elements, and the rules need to be followed in full for the non-payment elements. A reminder is also given here that disclosure requirements for payment services need to comply with Part 5 of the Payment Services Regulations.

Practical Guidance:

Firms need to identify when a contract contains both payment service elements and other components, and to ensure they apply the correct rules to each part.



CONC 2.7.14

Rule Summary:

Explains customers’ rights in choosing the method (s) of distance communication used

Explanation:

Customers have an absolute right to receive disclosure information on paper, i.e. in a hard copy posted to them. They also have the right to request a change to the method of communication used, such as from the internet to the postal service, and such a request should be complied with unless it is impractical to do so.

Practical Guidance:

Firms should comply with requests to change the method of distance communications used, unless it would be impractical to do so.



CONC 2.7.15

Rule Summary:

Refers to the implications if an unsolicited service is provided to a customer.



Explanation:

In the event that services are provided to a customer that they did not elect to receive, then the firm cannot force a customer to comply with their obligations under a distance contract. Simply because a customer does not reply to an invitation to provide a service does not mean that they have consented to do so. However, this provision does not apply when a contract is due for renewal, where the absence of any indication to the contrary can be used as an indication that a customer is willing to renew the contract, provided that the original terms of the contract allow for this.

Practical Guidance:

Firms should firstly endeavour not to provide any services of an unsolicited nature, but in the event that they do, they must take care not to force customers to comply with their obligations under a distance contract.



CONC 2.7.16

Rule Summary:

Explains that customer waivers have no relevance to application of the distance marketing rules.

Explanation:

Just because a customer indicates that they are not concerned about a firm following the distance marketing rules does not mean that the firm is then allowed to waive some of these rules. All of the distance marketing rules must be followed in all cases, except where exemptions apply.

Practical Guidance:

Firms must always follow the distance marketing rules, and should disregard any indications from customers about whether they require the rules to be applied. For example, all of the disclosure information must be provided, even if a customer suggests they are not concerned about receiving this information.



CONC 2.7.17

Rule Summary:

Explains that the distance marketing rules apply even if the law of a foreign country applies to the contract.

Explanation:

If the law of a country outside of the European Economic Area (EEA) will apply to a distance contract, but the contract has a close link with any EEA state, then customers are still entitled to the protection they enjoy under the distance marketing rules.

Practical Guidance:

Firms operating internationally must be aware of when the distance marketing rules will still apply to contracts with an overseas element.



CONC 2.8 E-commerce

CONC 2.8.1

Rule Summary:

Sets out that this section applies to e-commerce transactions.

Explanation:

The term ‘information society service’ is used for a service delivered by electronic means.



CONC 2.8.2

Rule Summary:

Explains the basic information to be provided in an e-commerce transaction.





Explanation:

Whenever a firm provides a service via electronic means in return for remuneration, it must provide the following information: its name; its postal address; its contact details including e-mail address; and a statement of its regulatory status, and that this can be checked on the Financial Services Register and its registration number on that register.

Professional firms must state: the relevant professional body they are a member of, their professional title and the country in which this was granted, a reference to the professional body regulations they are bound by and how these rules can be accessed, and the firm’s VAT number if they carry out VAT-registered activities.

Practical Guidance:

Firms must ensure that these details are clearly stated whenever they conduct electronic transactions.



CONC 2.8.3

Rule Summary:

Relates to price disclosure.

Explanation:

The price of any service must always be clearly and unambiguously stated, and if taxes and/or delivery costs are included in the price given, this must also be stated clearly and unambiguously.

Practical Guidance:

Firms must ensure that they are upfront with their customers as to how much their services will cost, and that this is clearly explained.



CONC 2.8.4

Rule Summary:

Sets out some high level requirements for commercial e-commerce communications.

Explanation:

A commercial communication or promotion of any kind must be clearly identifiable as such. It should be clear who has issued the communication or promotion, and any qualification criteria for a promotion should be clearly stated.

Practical Guidance:

Firms should ensure that anything they issue which might be seen as a commercial communication or a promotion makes it clear it has come from that firm, and that it is easily recognisable as a commercial communication or promotion.





CONC 2.8.5

Rule Summary:

Relates to unsolicited commercial communications being identifiable as such.

Explanation:

If a commercial communication sent via email is unsolicited, then it must be in a form such that any recipient would be expected to be able to identify it as a commercial communication immediately.

Practical Guidance:

Firms must ensure that all their commercial communications are clearly identifiable as such.



CONC 2.8.6

Rule Summary:

Relates to information that needs to be provided when carrying out an e-commerce transaction.

Explanation:

Firms must provide customers with all the technical information they need to be able to complete the e-commerce transaction on their computer or other device.

Firms must inform customers of whether the firm or the customer will complete the contract, and whether a copy of this contract will be available for the customer to view whenever they wish.

Customers must be provided with the means to check for input errors prior to conclusion of the contract, and there must be a means by which these errors can be corrected.

Firms must inform customers of the language (s) in which it is possible to conclude the contract.

If any codes of conduct apply to the contract, electronic links to these codes must be provided.

Where an electronic order is made, firms must promptly acknowledge this order, via electronic means.

Practical Guidance:

Firms must ensure their electronic systems allow the rules in this section to be complied with.



CONC 2.8.7

Rule Summary:

Clarifies one point in CONC 2.8.6.

Explanation:

Both the electronic order and the acknowledgement referred to in CONC 2.8.6 are deemed to have been received once the recipients are able to access them.

Practical Guidance:

Firms should make themselves aware of the exact point at which these last two rules take effect.



CONC 2.8.8

Rule Summary:

Relates to the format in which contractual information must be provided.

Explanation:

Contractual information must be provided in a format in which the recipient can store and reproduce it, such as a printable document or internet download.

Practical Guidance:

Firms must ensure that all of their contractual information is provided in a suitable format.



CONC 2.8.9

Rule Summary:

Explains a key exemption to the rules in CONC 2.8.6 on the provision of technical information.

Explanation:

The requirement to provide certain information before the order is placed, as laid out in CONC 2.8.6, does not apply if the contract is concluded exclusively by email.

Practical Guidance:

Before relying on this exemption, firms should ensure that only email methods of communication have been used throughout the process.



CONC 2.9 Prohibition of unsolicited credit tokens

CONC 2.9.1

Rule Summary:

Confirms that this section applies to all regulated credit firms.

Practical Guidance:

All credit firms must be aware of the provisions of this chapter.



CONC 2.9.2

Rule Summary:

Explains when credit tokens can and cannot be given to customers

Explanation:

A credit token is a token which can be exchanged for cash, goods or services provided on credit.

Such a token must only be given to customers who have consented to receiving them by giving their signed consent.

The only permitted exception is where the token is given out under an agreement with the customer that is already in force, or under an agreement where the terms allow for automatic renewal.

Practical Guidance:

Firms should ensure that credit tokens are only supplied in the circumstances permitted.



CONC 2.9.3

Rule Summary:

Relates to application of the Consumer Credit Act and the Payment Services Regulations

Explanation:

Although section 51 of the Consumer Credit Act was repealed in 2000, its provisions still apply under the Payment Services Regulations. This section concerns the provision of credit card cheques, and asks that they are only provided to customers who have asked for them, and that no more than three such cheques are provided for each request. If one request is made in respect of more than one credit token agreement, this request can be treated as one request for each agreement.

Practical Guidance:

Firms must ensure they are aware of, and follow, the requirements regarding the issue of credit card cheques.



CONC 2.10 Mental capacity guidance

CONC 2.10.1

Rule Summary:

Clarifies when this chapter applies.

Explanation:

This chapter applies to all firms offering a credit agreement, or significantly increasing the amount of credit offered under an existing agreement, or offering a limit on a running account credit arrangements such as an overdraft.

Practical Guidance:

Firms should ensure they understand when they need to apply the provisions of this chapter.



CONC 2.10.2

Rule Summary:

Explains relevant legislation in this area.

Explanation:

Relevant legislation includes the Mental Capacity Act 2005 and the Adults with Incapacity (Scotland) Act 2000. The Ministry of Justice also has a Mental Capacity Act Code of Practice. Reference is also made to the need to understand the circumstances of the individual customer when applying mental capacity guidance and legislation. Agents and appointed representatives of an authorised firm are also subject to this legislation.

Practical Guidance:

Firms must ensure they understand what the relevant legislation and guidance in this area is.



CONC 2.10.3

Rule Summary:

Defines mental capacity.

Explanation:

Mental capacity is an individual’s ability to understand, remember and consider relevant information, and to make judgements based on this.

Practical Guidance:

Firms should ensure they are conversant with this definition.





CONC 2.10.4

Rule Summary:

Explains when a firm should treat a customer as mentally incapacitated.

Explanation:

The default position must be to assume that a customer is not mentally incapacitated, but to be ready to alter this view if the firm picks up indications of mental incapacity, or is told by another person who would be expected to know about such a condition.

Practical Guidance:

Firms should be alert to any suggestions that any of their customers might be suffering from mental incapacity.



CONC 2.10.5

Rule Summary:

Clarifies further the criteria to be used to judge mental incapacity.

Explanation:

Even if the firm suspects that a customer is mentally incapacitated, it should not consider the customer as unable to make a borrowing decision unless it has attempted, without success, to assist the borrower in reaching that decision.

Practical Guidance:

Where a firm identifies a customer as mentally incapacitated, they must be prepared to try and assist that person as much as possible in reaching a borrowing decision.



CONC 2.10.6

Rule Summary:

Gives examples of mental disorders.

Explanation:

Mental incapacity may occur as a result of conditions such as a mental health condition, dementia, a learning disability, a developmental disorder, a neurological disability or brain injury and alcohol or drug dependency.

Practical Guidance:

Firms should be aware of all the reasons why mental capacity may occur, and should treat any customer known or suspected to have one of these conditions as a vulnerable customer requiring assistance under the provisions of this chapter.



CONC 2.10.7

Rule Summary:

Refers to the fact that firms must not make undue assumptions about customers showing signs of mental incapacity.

Explanation:

Even if the firm has identified that a customer may have one of the conditions listed in CONC 2.10.6, it must not automatically assume that the customer cannot make their own borrowing decisions.

Practical Guidance:

Firms should consider the nature of their dealings with customers, and make a reasonable judgement as to whether the customer is able to make an informed borrowing decision of their own accord.



CONC 2.10.8

Rule Summary:

Gives some indications of mental incapacity.

Explanation:

Indications of mental incapacity might include:

  • An existing customer makes an unexpected or out of character decision

  • A relative, friend, carer or doctor raises concerns with the firm about a customer’s mental capacity

  • The firm knows or has reason to believe that the customer has been diagnosed with a mental impairment

  • The customer does not appear to understand the product they are applying for

  • The customer does not appear to understand key information relating to the contract

  • The customer appears unable to recall information provided to them by the firm

  • The customer appears unable to consider the information provided to them by the firm

  • The customer is unable to communicate their borrowing decision to the firm

  • The customer does not understand basic personal information that the firm requires, such as date of birth or address

Practical Guidance:

All customer facing staff should be made aware of these indications, and how to proceed if any of the indications are present in a customer





CONC 2.10.9

Rule Summary:

Concerns discrimination against those with mental incapacity, and lending decisions for customers of this type.

Explanation:

Firms must not discriminate unfairly against customers with mental incapacity. However, if the firm believes that a customer’s incapacity could give them cause to have a credit agreement declared void or unenforceable, it is entitled to make a decision not to lend to that customer, or not to increase its level of lending to that customer.

Practical Guidance:

A fair decision on whether to lend to a mentally incapacitated customer must still be made, but firms must also consider whether a credit agreement would be enforceable given the information they have about the customer’s condition.



CONC 2.10.10 & CONC 2.10.11

Rule Summary:

Customers must have procedures in place for dealing with customers with mental incapacity.

Explanation:

Firms must ensure they have documented business procedures for dealing with customers with mental incapacity, including procedures for dealing with mentally incapacitated customers who go into arrears. These procedures must ensure that these customers are treated fairly.

Practical Guidance:

More details are given in CONC 2.10.12, but firms must ensure all customers are treated fairly at all times, including those with mental incapacity.



CONC 2.10.12

Rule Summary:

Explains how customers with mental incapacity might be handled.

Explanation:

Firms must provide all reasonable assistance to customers with mental capacity issues. Decisions on whether to lend must consider all available information and meet the principle of responsible lending. Risks to the customer caused by their mental capacity must be mitigated where possible.

Practical Guidance:

When dealing with mentally incapacitated customers, firms must think carefully about how they can assist them, and take the utmost care when making their lending decisions.



CONC 2.10.13

Rule Summary:

Addresses the balance between a person’s right to make a decision and the need to protect that person.

Explanation:

All applicants have a right to make their own decisions, and this right must be respected, but it must also be balanced against the need to protect them against the consequences of a bad decision when they are unable to reach a considered decision themselves.

Practical Guidance:

If a firm identifies that a customer has mental capacity limitations, and believes that their decision making abilities are restricted, it must not allow them to reach a borrowing decision without appropriate assistance.



CONC 2.10.14

Rule Summary:

Relates to providing information in a clear manner.

Explanation:

Although this appears in the mental capacity section, this rule does not make specific reference to mental incapacity. Instead it refers to the need to provide information to all customers in a way which is clear, fair and not misleading, and to consider how information could be presented in a more user friendly format.

Practical Guidance:

Firms should ensure that all information provided to customers is as clear and unambiguous as possible.



CONC 2.10.15

Rule Summary:

Refers to what might be a trigger for applying the mental incapacity procedures.

Explanation:

CONC 2.10.6 listed a number of indications that a customer may be mentally incapacitated. Any of these indications might reasonably lead the firm to decide to invoke its special procedures for assessing if a customer can understand the contract, whether they can afford the payments and whether the contract is suitable for them.



Practical Guidance:

Firms should be alert to any indications that a customer might be mentally incapacitated, and should consider what additional protections are appropriate for any such customer.



CONC 2.10.16

Rule Summary:

Relates to the design of policies and procedures with mentally incapacitated customers in mind.

Explanation:

Firms should design their standard policies and procedures for dealing with customers in such a way that the mentally incapacitated customer has a reasonable chance of being able to overcome their limitations.

Practical Guidance:

Firms should consider this when designing their standard procedures.



CONC 2.10.17

Rule Summary:

Relates to giving mentally incapacitated customers time to make decisions.

Explanation:

Mentally incapacitated customers should be given sufficient time to allow them to consider the information they have been given and to reach a borrowing decision. They should be allowed to defer a borrowing decision until a later date should they wish to.

Practical Guidance:

Firms must ensure that mentally incapacitated customers are not rushed into decisions.



CONC 2.10.18

Rule Summary:

Relates to firms’ scrutiny of applications from mentally incapacitated customers.

Explanation:

Firms must apply a high level of scrutiny to applications from mentally incapacitated customers to reduce the risk of them entering into unsustainable borrowing arrangements.

Practical Guidance:

Firms must look more closely at applications from mentally incapacitated customers than they would for other customers. For example, if a firm checks a sample of advised sales to assess suitability, it should ensure that cases involving mentally incapacitated customers are always checked.

CONC 2.10.19

Rule Summary:

Relates to balancing risks when dealing with mentally incapacitated customers.

Explanation:

Firms must balance the risks of customers taking out unsustainable credit agreements with the possibility of unfairly denying credit to an applicant. A customer who is known or suspected to have mental capacity issues should be subject to a rigorous credit worthiness assessment, and information provided by the customer should be treated with caution when carrying out this assessment.

Practical Guidance:

Firms must make carefully considered decisions about whether it is appropriate to lend to mentally incapacitated customers, considering all available information. Credit worthiness assessments should be conducted using verified customer information wherever possible.



CONC 2.10.20

Rule Summary:

Relates to the suitability threshold for mentally incapacitated customers.

Explanation:

Even if the firm believes that a mentally incapacitated customer can afford the proposed contract, they should not provide credit unless they also believe the contract is suitable.

Practical Guidance:

Firms must carry out comprehensive assessments of whether proposed contracts are suitable for the customer.



(Except where stated, the term ‘communication’ in the analysis of Chapter 3 includes financial promotions)

CONC 3.1 Application

CONC 3.1.1

Rule Summary:

A purely legal statement.



CONC 3.1.2

Rule Summary:

Clarifies firms’ responsibility for appointed representatives.

Explanation:

An authorised firm with appointed representatives (ARs) should be used to the idea that they will be held accountable for any failings in the ARs activities, and this extends to communications issued by the AR.

Practical Guidance:

Firms with ARs must have a robust system in place for checking and approving any communication an AR intends to use before it is issued.



CONC 3.1.3

Rule Summary:

Clarifies the scope of Chapter 3.

Explanation:

Chapter 3, which relates to a firm’s communications with customers, applies to communications concerning credit agreements, credit broking and operation of an electronic system in relation to lending activities (such as peer-to-peer lending firms).

Practical Guidance:

Firms should ensure they are totally clear which communications the provisions of Chapter 3 apply to.



CONC 3.1.4 & CONC 3.1.5

Rule Summary:

Clarifies the scope of Principle 7.

Explanation:

The FCA require that all communications with customers are clear, fair and not misleading. This includes communications which relate to debt counselling, debt adjusting, consumer hire and credit information services.

Practical Guidance:

Firms should ensure that all information provided to customers is as clear and unambiguous as possible, and complies with the detailed rules regarding their content and form.



CONC 3.1.6

Rule Summary:

Clarifies some exemptions to Chapter 3.





Explanation:

Chapter 3 does not apply to business lending. So if a credit agreement, hire agreement or peer-to-peer agreement is solely for a customer’s business, then these rules on communications do not apply.

Examples of ‘excluded communications’ include communications from outside the UK, personalised illustrations provided to customers and one-off cold calls that are not part of an organised marketing campaign.

Chapter 3 also does not apply to ‘qualifying credit’. In this case the communications rules in the Mortgage Conduct of Business (MCOBS) sourcebook will apply instead. Qualifying credit is any secured loan offered by a company which arranges regulated mortgage contracts. So essentially, any communications for second charge secured loans issued by companies who also sell residential first charge mortgages will be covered by the MCOBS communications rules and not those in CONC. However, a credit firm that arranges second charge secured loans but not residential first charge mortgages will be subject to the CONC communications rules. And a firm that arranges first charge mortgages and offers a wide range of other credit products will be subject to the MCOBS rules for their secured lending and the CONC rules for their unsecured lending.

Practical Guidance:

Firms must be aware of when the provisions of Chapter 3 apply and when they do not. In particular, firms must be clear about when MCOBS applies and when CONC applies.



CONC 3.1.7 & CONC 3.1.8

Rule Summary:

Sets out limitations to the detailed communications rules for more basic types of communication.

Explanation:

A communication that contains only a firm’s name, its logo, contact details and a brief factual description of its business is exempt from many of the requirements of the chapter on financial promotions.

Practical Guidance:

Firms who send basic communications of this type must still ensure that they comply with the applicable rules in Chapter 3.3 and Chapter 3.5, which we shall look at later. See also 3.3.3 below about how a name or logo could give a false or misleading impression of the firm.



CONC 3.1.9

Rule Summary:

Clarifies the geographical issues concerning Chapter 3.

Explanation:

Chapter 3 applies to communications to persons located in the UK; to real time promotions (telephone, face to face etc) carried out in the UK, or for business activities carried out in some form in the UK; and to electronic communications made within the European Economic Area. The provisions of Chapter 3 apply if any of these criteria are met, even if the credit agreement is subject to the law of a country other than the UK.

Practical Guidance:

Firms should ensure they are clear as to whether their promotion is bound by the rules.



CONC 3.2 Financial promotion general guidance

CONC 3.2.1

Rule Summary:

Clarifies applicable legislation.

Explanation:

The Financial Services and Markets Act 2000 includes restrictions on promotions by unauthorised firms, and some of these restrictions apply here. Section 21 (1) says that an unauthorised person or firm may not communicate a financial promotion unless its content has been approved by an authorised firm or person.

Practical Guidance:

Firms who use unauthorised agents, such as introducers, should be aware of this restriction.



CONC 3.2.2

Rule Summary:

Confirms relevant legislation in the area of promotional activities.

Explanation:

Unsolicited calls, texts, faxes and emails are subject to the provisions of the Privacy and Electronic Communications (EC Directive) Regulations 2003.

Practical Guidance:

Firms should ensure they are aware of the content of these Regulations.



CONC 3.3 The clear fair and not misleading rule and general requirements

CONC 3.3.1

Rule Summary:

States the basic requirement for any communication.

Explanation:

All communications must be clear, fair and not misleading.

Practical Guidance:

Firms should review communications before they are issued to ensure they adhere to this principle.



CONC 3.3.2

Rule Summary:

Covers some general requirements for promotions.

Explanation:

Communications must use plain English, be legible and state the name of the firm making the communication (or the name of the firm on whose behalf it is made should a regulated firm use a third party for its communications). For a credit broking communication, the name of the lender should be stated, where this is known

Practical Guidance:

Firms should review communications before they are issued to ensure they adhere to these rules



CONC 3.3.3

Rule Summary:

Concerns one specific misleading idea that may be conveyed by a credit communication.

Explanation:

Communications must not state or imply that credit is available to all applicants regardless of their status and personal circumstances.

Practical Guidance:

Firms should review communications before they are issued to ensure they adhere to this rule. All staff should be made aware that they should not give any customer the impression that they will definitely receive credit until they have been approved.



CONC 3.3.4

Rule Summary:

Clarifies how firms might give a misleading impression of the type referred to in CONC 3.3.3 by use of their name, logo or internet address.

Explanation:

It may not just be the content of a communication which might suggest that credit is definitely available to all applicants. A firm must also not use a name, trading name, logo or internet address which states or implies this, so trading as Loans For All or similar would breach this rule.

Customers are sometimes told that their applications have been ‘pre-approved’. A customer should only be told this if all checks regarding their credit status have been completed. Checks must also have been carried out by the lender (or peer-to-peer lending firm), not by a broker or other firm.

Practical Guidance:

Firms must check that their name, trading name, logo or internet address does not give a false impression of this kind. Firms, especially brokers, must also take care not to inform customers they have been pre-approved until all the conditions for this have been satisfied.



CONC 3.3.5

Rule Summary:

Gives more details on what clear, fair and not misleading means.

Explanation:

Clear, fair and not misleading means that communications:

  • Are identifiable as communications or financial promotions from a particular firm (Some firms have for example been censured for sending communications that appear to be from friends of the recipient).

  • Are accurate

  • Give a balanced view of the advantages and disadvantages/risks of the relevant course of action

  • Are likely to be understood by the average member of the group at whom they are directed

  • Do not disguise, obscure or draw attention away from important information, statements and warnings. (Some recent promotions, whilst stating the Annual Percentage Rate as required, have not displayed it sufficiently prominently, or have suggested in some way that the rate is less relevant than other information).

Practical Guidance:

Firms should review communications before they are issued to ensure they adhere to these rules.



CONC 3.3.6

Rule Summary:

Relates to the way a firm describes its regulatory status on a communication.

Explanation:

A firm can name the FCA as its regulator on a communication. If it is regulated by the Prudential Regulation Authority (PRA) then this can also be stated. However, if a firm also carries out activities not regulated by these bodies, and a communication concerns these non-regulated activities in any way, then the communication must make clear which are regulated by the FCA/PRA and which are not. For example, a regulated mortgage broker advertising their buy to let offering would need to state that buy to let mortgages are not regulated by the FCA (correct as of June 2015).



Practical Guidance:

Firms who carry out both FCA regulated and non-regulated activities must ensure their communications make it clear which activities are covered by the FCA and which are not.



CONC 3.3.7

Rule Summary:

Relates to disclosure of material facts.

Explanation:

Leaving out certain information from a communication may be unfair, or may result in the communication being misleading.

Practical Guidance:

Firms need to consider what information they need to disclose in a communication, and should not leave information out with the aim of misleading the customer or providing them with an incomplete picture.



CONC 3.3.8

Rule Summary:

Relates to product comparisons made in communications.

Explanation:

If a communication compares one product with another product, whether or not that other product is also provided by the firm, then the comparison must be fair and balanced, and ideally compare like with like.

Practical Guidance:

Firms should ensure all comparisons made in communications are fair and balanced, and that any claims made about one product in relation to another can be substantiated.

CONC 3.3.9

Rule Summary:

Relates to requirements for premium rate phone numbers.

Explanation:

If a communication invites people to call the firm on a premium rate phone number, then the communication should also state the price per minute, the expected duration of the call and the expected total cost.

Practical Guidance:

Firms who make use of premium rate phone numbers must ensure that they disclose all necessary information about the likely cost.

CONC 3.3.10

Rule Summary:

Examples of what would constitute unclear, unfair or misleading communications.

Explanation:

The following are all practices which are likely to result in unclear, unfair or misleading communications:

  • Stating or suggesting that the firm is a lender, when they are not

  • Making misleading statements regarding the availability of credit

  • Not disclosing, or mis-representing, the firm’s name

  • Using false testimonials and references

  • Making false statements or allowing false implications to be made about a firm’s size or standing

  • Suggesting that a firm can clear a customer’s debt within a specified time frame, or suggesting that clearing debts is a simple process

  • Using an online tool, such as a budget planner, which fails to fully assess a client’s financial situation; or which does not include a risk warning that the results provided by the tool depend on accurate information being entered

  • Emphasising the reduction in monthly payments from a debt solution without also making clear that total repayments and/or the time taken to repay the debt may increase; without stating that the customer’s credit rating may be adversely affected; and without stating that lenders are not obliged to accept a reduced payment and are not obliged to freeze interest or charges



Practical Guidance:

Firms should check their communications before they are issued to ensure that none of these practices are being followed.

CONC 3.3.11

Rule Summary:

Relates to making misleading introductions.

Explanation:

It is unfair to state or suggest that a firm will introduce a customer to a provider of standard personal loans, credit cards or overdrafts, when they are in fact referring them to a high cost lender, such as a payday lender.

Practical Guidance:

Firms who effect introductions must be totally transparent as to the type of lender they are referring the customer to.

CONC 3.4 Risk warning for high-cost short-term credit

CONC 3.4.1

Rule Summary:

Relates to the required risk warning for high cost short term credit.

Explanation:

Communications relating to high cost short term credit, which includes payday loans, must prominently include the full risk warning as documented in this section. This warning is required on all communications for this type of credit.

Practical Guidance:

Lenders and brokers who offer these types of loans must ensure the required warning appears in full on all of their communications, and is given sufficient prominence.

CONC 3.4.2

Rule Summary:

Relates to use of the Money Advice Service logo.

Explanation:

The Money Advice Service (MAS) logo can be used as an alternative to its website address when complying with CONC 3.4.1. The MAS logo should not be used for any purposes for which firms have not been given specific permission to use it.

Practical Guidance:

Firms should ensure that the risk warning includes either the MAS website address or logo, and that they do not use the MAS logo on other communications.

CONC 3.5 Financial promotions about credit agreements not secured on land

CONC 3.5.1

Rule Summary:

Clarifies the scope of chapter 3.5.

Explanation:

Section 3.5 applies to both lenders and brokers who issue promotions regarding unsecured consumer credit agreements.

Practical Guidance:

All firms who this section applies to must familiarise themselves with its content.

CONC 3.5.2

Rule Summary:

Relates to being able to provide the service specified in a promotion.

Explanation:

A firm must not issue a promotion regarding credit which relates to the supply of goods and services, if at the time of issue, the firm and/or its suppliers are not prepared to provide the goods and services.

Practical Guidance:

Firms should ensure they only issue promotions for products or services they are prepared to provide at the time.

CONC 3.5.3

Rule Summary:

Sets out when certain information is required to be disclosed in a promotion, and when it is not required.

Explanation:

Whenever a promotion contains information about the cost of the credit being offered, whether in monetary or percentage terms, certain other cost information needs to be given, which we shall look at further in the analysis of CONC 3.5.5 below. Simply stating the representative APR – the APR expected to apply to at least 51% of credit agreements entered into – however does not by itself trigger a requirement to disclose other financial information.

The postal address of the firm must be stated on a promotion unless it is a television or radio advertisement, or it is a non-written promotion which is delivered at the firm’s premises, or it gives the name and address of any credit broker or dealer who will arrange the sale of any credit.

Practical Guidance:

Firms must ensure they understand when detailed cost information needs to be provided on their promotions.

CONC 3.5.4

Rule Summary:

Clarifies the meaning of a rate of interest for the purposes of chapter 3.5.

Explanation:

The definition of a rate of interest used in CONC 3.5.3 includes daily, monthly or annual rates. Stating that an agreement will have 0% interest is also regarded as stating a rate of interest for the purposes of CONC 3.5.3. Referring to interest rates might require additional information to be disclosed as per CONC 3.5.5 below.

Practical Guidance:

Firms should ensure that additional information is given as required whenever interest rates are disclosed on a promotion



CONC 3.5.5

Rule Summary:

Sets out the required cost information.

Explanation:

Whenever interest rate or cost information is included within a promotion, other than simply stating the representative APR, all of the following information also needs to be included:

  • The interest rate, and whether it is fixed or variable

  • The amounts of any other charges

  • The total amount of credit being provided

  • The representative APR (unless it is an authorised overdraft facility being offered to retail customers)

  • If the credit involves a deferred payment, the cash price and the amount of any advance payment required

  • The duration of the credit agreement (unless it is open-ended)

  • The total amount repayable over the term of the agreement

  • The amount repayable in each individual repayment

Where these amounts can vary over the term of the agreement, the figures stated must be those that the firm reasonably expects to apply at the time it issues the promotion.

If the agreement allows for different methods of drawdown to be used, for which different interest rates apply, then the promotion must state the highest interest rate that applies to the most frequently used drawdown method.

All the information required by CONC 3.5.5 must be presented in a clear and concise way. The information must be accompanied by the words ‘representative example’, indeed when that phrase is used it will always mean disclosure of information of this type. All of the information detailed in the above bullet points must be given equal prominence in the promotion, and if the firm decides to disclose other cost information, or mention an incentive to take out credit, such information should be given lower prominence than the required information detailed above.



Practical Guidance:

Firms need to be clear about when a representative example is required, and when it is needed, they need to ensure that all required information is disclosed.



CONC 3.5.6

Rule Summary:

Provides more guidance on the content of representative examples.

Explanation:

If as a result of entering into the advertised credit agreement, it would be expected that a customer would also enter into other forms of credit agreement, the required information in CONC 3.5.5 must also be disclosed for these other forms of credit.

The interest rate stated should be the effective annual interest rate if compound interest is a feature of the advertised credit agreement.

If any of the stated interest rates apply only for a fixed period, then the length of this period and the rate that will apply after that time need to be stated.

When promotions refer to charges, it should be clear what the nature of that charge is. If the amount of the charge is an estimate, this should also be made clear.

The ‘total amount of credit’ is the sum which is advanced to the customer for their own use, and does not include any fees or charges.

Practical Guidance:

Firms should familiarise themselves with the definitions of terms used in this chapter.



CONC 3.5.7

Rule Summary:

Gives details of other circumstances in which a representative APR needs to be disclosed.

Explanation:

In addition to when other cost information is provided, as covered in CONC 3.5.5, the representative APR is also required if the promotion:

  • States or implies that credit is available to customers whose access to credit might be restricted.

  • States or implies that credit is available on more favourable terms than with other providers.

  • Provides any sort of incentive to enter into the credit agreement. This includes both discounts and gifts and any statements or implications about the speed or convenience of the application process. The APR must be given greater prominence than any mention of an incentive of this type.

These rules about the APR do not apply to authorised overdrafts provided to retail customers.

Practical Guidance:

Firms should note the additional ways in which a requirement to disclose the representative APR is triggered. Payday lenders frequently emphasise the speed and convenience of their service, so these firms in particular need to note that the representative APR needs to ben given greater prominence than any information of this nature.



CONC 3.5.8

Rule Summary:

Clarifies what an incentive to apply for credit might be.

Explanation:

This relates specifically to the ‘speed or convenience’ type of incentive referred to in CONC 3.5.7 above. Statements on promotions of this nature are to be regarded as incentives if they would be likely to influence or persuade customers to apply for credit.

Practical Guidance:

If in doubt as to whether any statement constitutes an incentive, firms should disclose the representative APR.



CONC 3.5.9

Rule Summary:

Clarifies some wording to be used when stating an APR.

Explanation:

An APR must be accompanied by the percentage symbol, i.e. ‘x%APR’, together with a statement that it is variable, if this applies. The representative APR must be accompanied by the word ‘representative’.

Practical Guidance:

Firms should ensure that these requirements are met in their promotional material.



CONC 3.5.10

Rule Summary:

Relates to ancillary services on credit agreements.

Explanation:

Consider if the promotion is for any form of credit which requires the customer to enter into any other form of financial service (an ancillary service), or where the provision of the ancillary service would enhance the terms on which credit was offered. If either of these circumstances apply, and the cost of this additional service cannot be determined in advance, then it must be made clear in the promotion either that the ancillary service is compulsory, or that it would enhance the terms on which credit was provided.

This information must be provided alongside the representative APR, and given the same prominence as the content of a representative example as detailed in CONC 3.5.5.

This rule does not apply to authorised overdrafts provided to retail customers.

Practical Guidance:

Firms offering ancillary services of this nature should ensure their promotions are totally clear and unambiguous in this respect.



CONC 3.5.11

Rule Summary:

Relates to the provision of security for a loan.

Explanation:

Although chapter 3.5 relates to loans that are not secured on land, at times some other form of security may be required. If this is the case, the promotion should state this, and should confirm the type of asset required as security.

Practical Guidance:

Firms who offer loans secured on assets other than land or property should ensure their promotions comply with this rule.



CONC 3.5.12

Rule Summary:

Defines some of the terms used in this chapter, and when they can and cannot be used on promotional material.

Explanation:

Overdraft’ should only be used for a facility that allows a customer to draw more funds than the level of their balance on a current account.

Interest free’, or similar expressions, should only be used when a customer will not need to pay any more for an item than they would have done had they purchased it with a one-off cash payment.

Unless no advance payments of any kind are required, the term ‘no deposit’ or similar must not be used.

Loan guaranteed’, ‘pre-approved’, ‘no credit checks’ or any other equivalent expression must not be used if the agreement is subject to the customer’s credit status in any way.

Gift’, ‘present’ or similar must not be used if there is any requirement for the customer to repay credit or to return an item at a later date.

Promotions must not give a weekly equivalent payment unless weekly payments are actually permitted under the terms of the agreement.

Practical Guidance:

Firms using any of these expressions must take the utmost care to ensure they really are an appropriate description of their offering.



CONC 3.5.13

Rule Summary:

Clarifies some items relating to total charge for credit and APR.

Explanation:

If a credit limit applies to an overdraft type agreement, and the precise amount of this limit is not known at the time that the promotion is issued, but it is known that the limit will be less than £1,200, then it must be assumed that the limit will be £1,200.

If all required repayments under an agreement are equal except for one, and the amount of that one repayment is not significantly more or less than the others, then the APR can be calculated on the basis that all the repayments are at the same level as the normal repayment. The acceptable tolerance here is that the difference exhibited by the one payment must be no more in pence than the number of repayments due.

If an agreement requires more than three payments, all payments are to be made at equal intervals, and the time between the start of the credit agreement and the first payment is greater than the time between the payments, then a firm is entitled to calculate the APR as if the interval between the start date and the first payment is the same as the interval between the payments.

Practical Guidance:

Firms to whom these special circumstances might apply should ensure they know what are acceptable tolerances for quoting the APR and which are not



CONC 3.6 Financial promotions about credit agreements secured on land

CONC 3.6.1

Rule Summary:

Clarifies when chapter 3.6 applies.

Explanation:

Chapter 3.6 applies to financial promotions issued by both lenders and brokers concerning credit agreements secured on land. However, if the firm in question also conducts lending or broking activities with regard to regulated mortgage contracts, Chapter 3.6 does not apply, and firms should instead comply with the financial promotions rules in the FCA’s Mortgage Conduct Of Business (MCOB) sourcebook.

Practical Guidance:

Firms should ensure they are totally clear about when the provisions of chapter 3.6 apply, and when other Handbook sections might apply instead



CONC 3.6.2

Rule Summary:

Explains the definition of ‘relevant date’ used.

Explanation:

In most cases, the relevant date will be the date on which the credit agreement is drawn up. However, if the agreement specifies the first date on which the customer will be entitled to receive any monies or anything else under the agreement, then this date will be the relevant date.

Practical Guidance:

Firms should understand what the relevant date for any particular agreement is.



CONC 3.6.3

Rule Summary:

Relates to being able to provide the service specified in a promotion.

Explanation:

A firm must not issue a promotion regarding credit which relates to the supply of goods and services, if at the time of issue, the firm and/or its suppliers are not prepared to provide the goods and services in exchange for cash.

Practical Guidance:

Firms should ensure they only issue promotions for services they are prepared to provide at the time.

CONC 3.6.4

Rule Summary:

Explains how including certain financial information in a financial promotion triggers the need for additional information to be disclosed.

Explanation:

If a promotion contains any information about the frequency, number or amount of repayments required; or information about other payments and charges; or states the total amount repayable under the credit agreement, then the promotion must also include:

  • Details of the amount of money to be lent under the credit agreement, or the minimum and maximum amounts that could be lent if the exact amount is not known

  • Details of any requirement to make a deposit of money in connection with the credit agreement

  • The cash price of any goods or services to be provided under the agreement

  • Whether an advance payment is required, and how much this payment would be, expressed as a monetary amount or a percentage. If the amount of the advance payment is not known, then the minimum amount should be stated

  • The postal address of the firm making the promotion, unless the promotion is a television or radio advertisement, or it is delivered in a non-written form on the firm’s premises, or the address of a dealer or broker who would be involved in the process were an application to be made is given instead

All of this information must be given equal prominence.

Practical Guidance:

Firms should be aware of what information triggers the need to disclose further information, and of what this further information is.

CONC 3.6.5

Rule Summary:

Details some risk warnings required on secured credit promotions.

Explanation:

The promotion must state that security is required, or may be required, for the loan, and should state the nature of the security, i.e. land or property for the purposes of this chapter

If the credit agreement is such that no regular repayments are made during the term of the contract, such as in an equity release type contract; or the lender is not entitled to re-possess the land or property to enforce the agreement, then the following risk warning must appear on financial promotions: “CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN ANY DOUBT, SEEK INDEPENDENT ADVICE”.

Except in the above circumstances, all promotions for credit secured on land must contain the following risk warning: “YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT”

If the credit is effected to pay off debts held with other lenders (consolidation), then the following risk warning must also be included: “THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.”

If repayments are required under a credit agreement, secured on land or property, and repayments are required in a currency other than sterling, the following risk warning must also be included: “CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT”

All risk warnings must be given greater prominence in the promotion than any information about charges, other than the APR; and must also have greater prominence than any incentive that the promotion contains to enter into a credit agreement. The risk warning must also be no less prominent than any other financial information in the promotion.

The need for the risk warnings does not apply if the promotion:

  • Is made in a television or radio programme, of which the primary purpose is not to promote financial products (note therefore that they are required in television or radio advertisements)

  • Is communicated via a film which is not a television broadcast

  • Contains only the name of the firm

Practical Guidance:

Firms must understand when each of the risk warnings are needed, and use the correct wording for each warning and give them sufficient prominence within the promotion.

CONC 3.6.6

Rule Summary:

Explains when the APR needs to be disclosed on a secured credit agreement, and sets out some rules as to how it should be presented.

Explanation:

The typical APR must be quoted on a promotion if the promotion contains any of the following:

  • Other information about prices and/or interest rates

  • Information about the frequency or number of repayments required

  • An incentive to enter into the credit agreement – this includes any indications that the application process might be quick, easy or convenient

  • An indication that credit may be available to applicants who have had difficulty obtaining credit elsewhere

  • An indication that credit might be available on more favourable terms than with other lenders



If a range of possible APRs applies, the promotion must state both the highest APR which is likely to apply to credit agreements covered by the promotion, and the APR which represents the lowest figure likely to apply to at least 10% of the credit agreements. Both figures must be stated with equal prominence.

The APR figure must be accompanied by the percentage symbol, i.e. ‘x% APR’

Where the APR may vary, the word ‘variable’ should be included, i.e. ‘x% APR variable’

When quoting a typical APR the word ‘typical’ must accompany the rate quoted. The typical APR is the rate at or below which the firm reasonably expects at least 66% of the agreements that would be entered into as a result of the promotion.

If any other financial information of any type is included in the promotion, the typical APR must be stated alongside this information. The typical APR must be given greater prominence than any of this other financial information, and greater prominence than any incentive included in the promotion. For electronic promotions, the rules specifically require the typical APR to be stated in text that is at least 1.5 times the size of the other information.

If the promotion is for an overdraft facility on a current account, then the APR does not need to be stated, provided that the interest rate and any charges included in the total charge for credit are stated.

Practical Guidance:

Firms distributing secured credit promotions must ensure they are aware of the circumstances in which the need to state the APR is triggered, and the rules which apply to quoting the APR.



CONC 3.6.7

Rule Summary:

Clarifies what an incentive to apply for credit might be.

Explanation:

This relates specifically to the ‘speed or convenience’ type of incentive referred to in CONC 3.6.6 above. Statements on promotions of this nature are to be regarded as incentives if they would be likely to influence or persuade customers to apply for credit.

Practical Guidance:

If in doubt as to whether any statement constitutes an incentive, firms should disclose the APR.



CONC 3.6.8

Rule Summary:

Defines some of the terms used in this chapter, and when they can and cannot be used on promotional material

Explanation:

Overdraft’ should only be used for a facility that allows a customer to draw more funds than the level of their balance on a current account.

Interest free’, or similar expressions, should only be used when a customer will not need to pay any more for an item than they would have done had they purchased it with a one-off cash payment.

Unless no advance payments of any kind are required, the term ‘no deposit’ or similar must not be used.

Loan guaranteed’, ‘pre-approved’, ‘no credit checks’ or any other equivalent expression must not be used if the agreement is subject to the customer’s credit status in any way.

Gift’, ‘present’ or similar must not be used if there is any requirement for the customer to repay credit or to return an item at a later date.

Promotions must not give a weekly equivalent payment unless weekly payments are actually permitted under the terms of the agreement.

Practical Guidance:

Firms using any of these expressions must take the utmost care to ensure they really are an appropriate description of their offering.



CONC 3.6.9

Rule Summary:

Clarifies some items relating to total charge for credit and APR on secured running credit agreements.

Explanation:

This section applies to running-account credit, where a customer is allowed to receive cash, goods or services up to a defined credit limit.

When calculating the APR and/or the total charge for credit, firms must assume that the credit limit is £1,500 if the actual limit is anything equal to or above that figure. If the credit limit is below £1,500, the actual credit limit amount should be used.

It must be assumed also that the credit is provided for a 12 month period, and that it is provided in full at the outset.

If the interest rate will change at any point during the first three years of the agreement, the interest rate used must be the highest that will apply during that period.

The rate of interest relating to the provision of credit to purchase goods, services or land must be used, if this plays any part in the credit arrangement, even if the credit agreement also includes credit for any other purpose.

It must be assumed that the credit will be repaid in 12 equal monthly instalments.

If all required repayments under an agreement are equal except for one, and the amount of that one repayment is not significantly more or less than the others, then the APR and total charge for credit can be calculated on the basis that all the repayments are at the same level as the normal repayment. The acceptable tolerance here is that the difference exhibited by the one payment must be no more in pence than the number of repayments due.

If an agreement requires more than three payments, and all payments are to be made at equal intervals, and the time between the start of the credit agreement and the first payment is greater than the time between the payments, then a firm is entitled to calculate the APR and total charge for credit as if the interval between the start date and the first payment is the same as the interval between the payments.

Practical Guidance:

Firms should familiarise themselves with how the APR and the total charge for credit might be calculated





CONC 3.6.10

Rule Summary:

Lists the information which might require the APR to be disclosed

Explanation:

The APR needs to be disclosed if any price or interest rate information, or any details of the number or frequency of the required payments, appear in the promotion.

If any of the following appears in the promotion, the APR must be displayed with greater prominence than the other information:

  • Any price or interest rate information, or any details of the number or frequency of the required payments

  • A statement of the need to make a deposit in connection with the credit agreement, if applicable

  • A statement as to whether an advance payment is required

Practical Guidance:

Firms should ensure they are totally clear about when the requirement to disclose the APR applies, and when it needs to be given greater prominence



CONC 3.7 Financial promotions and communications: credit brokers

CONC 3.7.1 & CONC 3.7.2

Rule Summary:

Clarifies when chapter 3.7 applies.

Explanation:

Chapter 3.7 applies to communications and promotions carried out by credit brokers regarding credit agreements .

Practical Guidance:

All credit brokers need to be aware of the rules in this section, regardless of the type of credit they are involved with. They should also note that the provisions of chapters 3.5 and 3.6 also apply to them – this section is simply concerned with the rules that apply specifically to brokers.



CONC 3.7.3

Rule Summary:

Relates to a broker’s obligation to disclose how many lenders they have access to.



Explanation:

A communication should make clear how many lenders they can offer products from. For example, a broker might offer credit agreements from just one lender, or from a panel of selected lenders, or from all lenders in the marketplace who offer a particular form of credit.

Practical Guidance:

Brokers should ensure they make it clear how many lenders they can potentially deal with.



CONC 3.7.4

Rule Summary:

Lists some key issues relating to the content of brokers’ promotions.

Explanation:

Firms must describe the services they offer in terms that should be easily understood by an average member of the public.

If the broker has any close links or agreements with one or more lenders that might have an impact on their ability to offer unbiased advice as to which provider is best, then specific details of this potential conflict should be communicated to the customer.

A credit broker wishing to describe themselves as ‘independent’ must be willing to consider a range of lenders that is large enough to represent a fair representation of the market. A broker whose ability to do this is restricted by having one or more agreements in place with lenders should not describe themselves as independent.

When describing the extent to which their services are independent, brokers must display this information in their communications prominently. The description must also be clear and easily understood.

Practical Guidance:

Brokers must be totally transparent with their customers as to what extent their services and advice is independent and unbiased



CONC 3.7.5 & CONC 3.7.6

Rule Summary:

Relates to the need to use the firm’s legal name.

Explanation:

A broker must ensure that communications and promotions use their firm’s legal name, as it appears in the Financial Services Register. They must not simply use a trading name without also giving the legal name.

Practical Guidance:

Firms must ensure that their legal name is displayed.

CONC 3.7.7 & CONC 3.7.8

Rule Summary:

Relates to brokers making clear that they are not lenders.

Explanation:

Brokers’ promotions must clearly state that the firm is a broker and not a lender. If the firm carries out both activities, but the promotion relates solely to its broking activities, promotion must state clearly that only its broking services are being promoted. For the statement to be prominent, it must be the case that the average person to whom the promotion is directed would be aware of the statement’s presence.

Practical Guidance:

Firms must ensure that all their promotions adhere to this rule.



CONC 3.8 Financial promotions and communications: lenders

CONC 3.8.1

Rule Summary:

Clarifies when chapter 3.8 applies.

Explanation:

Chapter 3.8 applies whenever a lender communicates a communication or promotion about lending of regulated consumer credit.

Practical Guidance:

All lenders need to be aware of the rules in this section, regardless of the type of credit they are involved with. They should also note that the provisions of chapters 3.5 and 3.6 also apply to them – this section is simply concerned with the rules that apply specifically to lenders.



CONC 3.8.2

Rule Summary:

Lists some examples of practices considered unfair in credit communications.

Explanation:

Lenders must not inform customers they can have a pre-determined amount of credit unless they have carried out a credit assessment on that customer, or an assessment of the impact the obligations under the agreement would have on the customer’s financial situation.

Lenders must not state or imply that the provision of secured credit is solely dependent on the value of the security offered.

Lenders must not promote credit to a customer for whom it knows or suspects that the credit in question would be unsuitable.

Practical Guidance:

Lenders must ensure their communications and promotions do not meet any of these criteria for being considered unfair.



CONC 3.8.3

Rule Summary:

Provides clarification as to what might constitute unsuitable credit in CONC 3.8.2.

Explanation:

Lenders must not encourage or advise a customer to take out secured credit when it is not in their interests to do so. This includes taking out secured borrowing to pay off unsecured borrowing.

Lenders must not promote high cost short-term credit products as being suitable for longer term borrowing.

Practical Guidance:

Lenders must ensure they refrain from doing either of these unfair practices.



CONC 3.8.4

Rule Summary:

Clarifies one key issue in relation to suitability assessments

Explanation:

Assessing whether a particular credit agreement is suitable for a customer is not the same as assessing whether any form of credit is suitable for them

Practical Guidance:

Lenders must ensure they do not confuse these two distinct things





CONC 3.9 Financial promotions and communications: debt counsellors and debt adjusters

CONC 3.9.1

Rule Summary:

Clarifies when chapter 3.9 applies





Explanation:

Chapter 3.9 applies whenever a debt counsellor or debt adjuster communicates a communication or promotion about regulated consumer credit.

Practical Guidance:

All relevant firms need to be aware of the rules in this section, regardless of the type of credit they are involved with. They should also note that the provisions of chapters 3.5 and 3.6 also apply to them – this section is simply concerned with the rules that apply specifically to counsellors and adjusters.



CONC 3.9.2

Rule Summary:

Re-iterates a key concept regarding communications, and gives a specific example of an inappropriate medium for debt counselling communications.

Explanation:

The requirement for communications to be clear, fair and not misleading applies to communications made by debt counsellors and adjusters.

Debt counsellors should not use methods where space is limited to promote their offering. This is likely to include some aspects of social media, where a maximum length applies to items posted.

Practical Guidance:

Firms should ensure their communications are clear, fair and not misleading; and that they do not use any medium where there is a restriction on the available space to promote their offering.



CONC 3.9.3

Rule Summary:

A detailed list of rules to be followed in debt counselling and adjusting communications.

Explanation:

Unless the same information has already been provided in a previous communication to the same customer, a communication must contain the following:

  • A clear statement of the range of services the firm can offer

  • Details of any relationships with other parties which are relevant to the services described in the communication

  • The fees to be charged, how these have been calculated and what services are provided in exchange. If the exact fees are not known, a reasonable estimate should be given

  • Whether any of the firm’s services require payment of an additional fee and/or are provided by another party

  • That complaints about the firm may be referred to the Financial Ombudsman Service, and details of how the customer can access the firm’s complaints procedures

  • That the firm provides a for-profit service (unless of course the firm is a not-for-profit debt counsellor or adjuster)

  • That the firm’s services are provided in return for payment of a fee by the customer

  • A reference to the fact that debt advice is available from not-for-profit bodies (unless of course the firm is itself a not-for-profit debt counsellor or adjuster)

  • If the communication makes reference to one or more options the customer has for resolving their debt issues, then the key advantages, disadvantages and risks of these options must be included

  • Details of any adverse impact the communicated debt solution might have on the customer’s credit rating

  • A statement to the effect that entering into an individual voluntary arrangement (IVA), a debt relief order or a protected trust deed will mean that the customer will appear on a public register as having done so

  • Where applicable, that a particular debt solution is only available in some parts of the UK, e.g. only in England and Wales or only in Scotland

  • If a particular debt solution would involve the counsellor/adjuster retaining all or part of the payments received from the customer for a certain period, then warnings are required about the fact that the debt solution could mean a customer falls into arrears, or could increase a customer’s arrears. Details of when the counsellor/adjuster will distribute the payments to lenders should also be given.

  • If the communication concerns an IVA or protected trust deed, then the communication needs to warn that: bankruptcy may result if the debt solution fails, homeowners may need to release equity from their homes to reduce their debts, re-mortgages may be more expensive, IVAs can be extended for 12 months if the re-mortgage option is not viable, entering into an IVA or trust deed will restrict the customer’s expenditure, lenders are not obliged to agree to an IVA or trust deed, and only unsecured debts included within the IVA or trust deed will be discharged at the end of the arrangement

  • Where another option other than the one being communicated is available for resolving a customer’s debt issues, a statement must be made to the effect that one or more other options are available, and that these options may be suitable

Practical Guidance:

This is a very lengthy list and counsellors and adjusters must take great care to ensure that all of these are covered in their communications.



CONC 3.9.4

Rule Summary:

Clarifies the requirement to provide information about sources of free debt advice in CONC 3.9.3.

Explanation:

Communications must make customers aware of the existence of free debt advice publications from the Insolvency Service (in England and Wales), the Department of Enterprise, Trade and Investment (in Northern Ireland) or the debt advice published by the Scottish Government (in Scotland).

Practical Guidance:

Firms must ensure that their communications refer to the availability of publications from these bodies, and that all relevant bodies are mentioned, so if the communication is distributed throughout the UK, the English, Northern Irish and Scottish bodies must all be mentioned.



CONC 3.9.5

Rule Summary:

Gives examples of unfair practices when effecting counselling/adjusting communications.

Explanation:

Communications must refrain from any of the following:

  • Stating or suggesting that the firm operates on a not-for-profit basis when it does not

  • Stating or suggesting that the firm is a charity or government body when it is not, or stating or suggesting that it represents a charity or government body when it does not

  • Promoting a claims management service as a method of resolving debt issues

  • Stating or suggesting that the firm’s negotiations with creditors on the customer’s behalf are guaranteed to produce a successful outcome

  • Unfairly asking a customer to call a premium rate phone number

Practical Guidance:

Hopefully no reputable firm would engage in any of these practices, but firms should note that carrying out any one of these actions is definitely considered to be unfair.



CONC 3.9.6

Rule Summary:

Gives an example of unfair use of a premium rate phone number.

Explanation:

It is unfair to give a premium rate phone number as the contact number for customers wishing to make a complaint.

Practical Guidance:

Firms should ensure that where customers are given a telephone number on which to make complaints, that this a freephone or standard rate number.



CONC 3.9.7

Rule Summary:

Relates to the way firms represent their services in online communications.

Explanation:

A firm’s website must not state, imply or be designed in such a way that users might be led to believe that a commercial firm offers a charitable service, a not-for-profit service or a government-backed service.

Firms must also not manipulate internet search tools and search engines in such a way that customers seeking charitable, not-for-profit or government-backed debt advice might be directed to their site.

Practical Guidance:

Firms must ensure they do not make any communication which might mislead a customer into thinking they are not a commercial entity.



CONC 3.10 Financial promotions not in writing

CONC 3.10.1

Rule Summary:

Clarifies to whom chapter 3.10 applies.

Explanation:

Chapter 3.10 applies to lenders, brokers, debt counsellors and adjusters and those who operate an online lending platform, such as a peer-to-peer lending company. The chapter applies to non-written promotions.

Practical Guidance:

Firms should consider whether this section applies to them or not.



CONC 3.10.2

Rule Summary:

States some rules for non-written communications provided away from the firm’s premises.

Explanation:

If the firm communicates a non-written promotion at any location other than the firm’s premises, it must be done at a reasonable time of the day. The firm must also identify themselves and give the name of their representative at the start of the promotion, and must make it clear to the recipient that they are engaging in promotional activity.

This might most commonly apply to visits to the customer’s home, which should not be made at unsocial hours. This is likely to mean late in the evening or very early in the morning in most cases, but if a firm knows that a customer would consider a daytime visit as unsocial – perhaps because they work night shifts – then it should also refrain from visiting at that time.

CONC 3.10.2 might also apply to street canvassing of potential customers, or to presentations delivered at locations other than the firm’s offices.

Practical Guidance:

When making any non-written promotion away from their premises, firms must ensure they meet all of the obligations in this section.



CONC 3.11 Not approving certain financial promotions

CONC 3.11.1

Rule Summary:

Clarifies to whom chapter 3.11 applies

Explanation:

Chapter 3.11 applies to lenders, brokers, debt counsellors and adjusters and those who operate an online lending platform, such as a peer to peer lending company. The chapter applies to non-written promotions.

Practical Guidance:

Firms should consider whether this section applies to them or not.



CONC 3.11.2

Rule Summary:

Explains the circumstances in which firms should not pre-approve their financial promotions.

Explanation:

The content of any promotion communicated via a telephone conversation, personal visit, other face-to-face conversation or other interactive dialogue (such as via an online chat facility) must not be approved in advance by the firm delivering it. This is because it is impossible to predict how the recipient will react during the dialogue, and how the firm’s representative will need to respond.

Practical Guidance:

Firms must not attempt to pre-approve an interactive financial promotion. However, they should have a robust system in place for approving all other financial promotions before they are communicated. If the firm lacks the resources and/or expertise to do this themselves, they should seek the assistance of a compliance consultant.





CONC 3.11.3

Rule Summary:

Clarifies that interactive communications can still be made.

Explanation:

The fact that firms should not pre-approve interactive communications does not mean that promotions of this nature cannot be delivered.

Practical Guidance:

Firms need to know they can make face-to-face or telephone promotions.



CONC 4.1 Content of quotations

CONC 4.1.1 & CONC 4.1.2

Rule Summary:

Clarifies which firms chapter 4.1 applies to.

Explanation:

All sections other than 4.1.4 apply to firms engaged in lending of consumer credit and hiring activities. Section 4.1.4 applies to credit broking.

Practical Guidance:

Firms should understand which areas of this chapter apply to them.



CONC 4.1.3 & CONC 4.1.4

Rule Summary:

Details statements and risk warnings a lender or broker must provide in a quotation.

Explanation:

A quotation provided by a lender, hirer or broker in respect of a regulated credit agreement must contain certain information:

  • A statement that the loan is, or may be, secured on a customer’s home, if this applies

  • If the loan is secured on the customer’s home, but no repayments are required (other than a repayment of rolled-up interest as a lump sum), and the lender cannot re-possess the property while the customer continues to occupy it, then the following risk warning must appear: “CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN DOUBT, SEEK INDEPENDENT ADVICE.”

  • If the loan is, or may be, secured against a customer’s home and the circumstances detailed above do not apply, then the following risk warning must appear: “YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.”

  • If a loan secured on land or property involves repayments in a currency other than sterling, the following risk warning must appear: “THE STERLING EQUIVALENT OF YOUR LIABILITY UNDER A FOREIGN CURRENCY MORTGAGE MAY BE INCREASED BY EXCHANGE RATE MOVEMENT.”

  • A statement that the hiring of goods under the agreement involves, or may involve, the customer’s home being provided as security, if this applies

  • If the customer’s home is, or may be, used as security in the above circumstances, the following risk warning must appear: “YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A HIRE AGREEMENT SECURED BY A MORTGAGE OR OTHER SECURITY ON YOUR HOME.”

Practical Guidance:

Lenders, hirers and brokers must ensure that they understand which statements and warnings are required in quotations, and then ensure that these statements and warnings are included.

CONC 4.1.5

Rule Summary:

Clarifies some terms used and gives additional requirements for the display of information on quotations.

Explanation:

For the purposes of chapter 4.1, a quotation is a document which gives information about the terms on which a lender is prepared to provide credit. However, the following documents should not be regarded as meeting the definition of a quotation:

  • A financial promotion

  • A document which relates to withdrawal from a prospective mortgage

  • A document which is intended to replace or partially replace the need for a full credit agreement or consumer hire agreement

  • A copy of an unexecuted credit agreement

Required statements in quotations, as listed in CONC 4.1.3 and 4.1.4, must be in capital letters, prominently displayed and easily readable.

Even if the information contained on it is only available temporarily, the document should be regarded as a quotation if it meets the definition of a quotation detailed above.

For Scottish firms, the terms ‘bailment’ and ‘hiring’ should be regarded as interchangeable. A reference to a mortgage or charge on land should be read as relating to the provision of a standard security of land for the loan.

Practical Guidance:

Firms should understand what a quotation is, and how information should be displayed on a quotation.







CONC 4.2 Pre-contract disclosure and adequate explanations

CONC 4.2.1

Rule Summary:

Explains when chapter 4.2 applies.

Explanation:

Chapter 4.2 applies to lenders, as well as to brokers who have responsibility for providing the necessary information to the customer. However, it does not apply where:

  • The loan is secured on land

  • The loan amount exceeds £60,260

  • The credit provided is an overdraft on a personal current account where repayment is not required on demand or within three months

Practical Guidance:

Firms should consider whether the credit they provide (or arrange as a broker) is covered by these specifications.



CONC 4.2.2

Rule Summary:

Adds a caveat to the exemptions in CONC 4.2.1.

Explanation:

Firms involved in the provision of credit that meets one or more of the three exemptions listed in CONC 4.2.1, i.e. secured loans, loans above £60,260 or overdrafts where payment is not required within three months, nevertheless need to consider whether it is appropriate to disclose any or all of the detailed information we shall look at later in CONC 4.2.5. In particular, firms should consider disclosing information relating to the consequences of missing repayments or repaying less than required, such as the risk of re-possession.

Practical Guidance:

Even if they are covered by one of the three apparent exemptions, firms still need to consider what level of information they should disclose to their customers, bearing in mind that the FCA has high-level principles which say that customers must be treated fairly and their information needs must be considered.



CONC 4.2.3

Rule Summary:

Explains the disclosure requirements, other than those in chapter 4, which apply to a credit agreement.



Explanation:

The FCA has taken over regulation of consumer credit, and has its own detailed rulebook. However, the Consumer Credit Act remains in force and its requirements still need to be complied with. Section 55 of the Act relates to explaining the key features of an agreement, including the risks; explaining the required repayments; and explaining the consequences of not paying.

If these disclosure requirements under section 55 are not met, then the credit agreement will only be enforceable if a court order to this effect is obtained.

Other disclosure requirements which must be complied with include those under the Financial Services (Distance Marketing) Regulations 2004, the Electronic Commerce (EC Directive) Regulations 2002, and the Consumer Protection from Unfair Trading Regulations 2008 and the Cancellation of Contracts made in the Consumer’s home etc Regulations 2008. In addition, reference is made to CONC 2.7, which relates to information that needs to be disclosed when carrying out distance marketing activities; and CONC 2.8, which relates to information that needs to be disclosed when carrying out e-commerce activities.

Practical Guidance:

Firms need to be aware of all the information that needs to be disclosed, not just that which appears in chapter 4.2



CONC 4.2.4

Rule Summary:

Explains that disclosure information may need to be tailored to information supplied by the customer.

Explanation:

Before disclosing any required information, firms should consider any information supplied by the customer, or any preferences expressed by the customer during their dealings with the firm, and consider whether the information disclosed needs to be tailored in any way as a result.

Practical Guidance:

Firms should consider whether any information provided by the customer during the process necessitates changing the way in which information is delivered.



CONC 4.2.5

Rule Summary:

Details the pre-contractual information that needs to be provided, and specifies other requirements as to how this information is delivered.

Explanation:

Where pre-contractual information is handed to the customer in person, they must be permitted to take that information away and consider it. The customer must be given the opportunity to ask questions about the agreement and be informed of how they can approach the firm for further assistance.

The required pre-contractual information, to be provided before a credit agreement is entered into, includes:

  • The required individual repayments, and where known, the total amount repayable over the term of the agreement

  • Any features of the agreement which make the credit unsuitable for particular uses

  • Any features of the agreement which could adversely affect the customer

  • Consequences of failing to make the required repayments, including charges for late payment, the impact on the customer’s credit rating and the implications for future credit applications, the possibility that legal action may be taken to recover the debt and the possibility of re-possession of the customer’s home or other security

  • Details of any right a customer has to withdraw from the agreement, together with information on when and how such a right should be exercised

The advice to the customer to consider this information, and the explanation of how they can seek further assistance, can generally be given either orally or in writing. However, if the information about unsuitable features, required payments and withdrawal rights is given either orally or distributed to the customer in person, then the information about features which could have an adverse effect, consequences of failing to make repayments and the advice to consider the disclosure information required under section 55 of the CCA must be given orally.

The disclosure requirements do not apply to a lender if a broker has disclosed all the required information to the customer in the correct way.

If the credit agreement is a pawnbroking arrangement, the disclosure requirements relating to the consequences of failing to pay and to withdrawal rights still apply, but those relating to required repayments, unsuitable features or features having an adverse effect do not. There is also no requirement to advise the customer to consider information provided under the section 55 disclosure requirements, and no obligation to advise the customer how to seek additional information from the firm. However, the requirement to give the customer the opportunity to ask questions about the agreement still applies.

CONC 4.2.5 does not apply to agreements entered into by a lender or broker outside their normal business activities. It also does not apply if the criteria for a small borrower-lender-supplier agreement are met.

Practical Guidance:

Firms must ensure they disclose all the required information, in the correct manner, before an agreement is concluded.



CONC 4.2.6

Rule Summary:

A qualification to the information disclosure requirements in CONC 4.2.5.

Explanation:

The explanations provided by the firm under the pre-contract disclosure requirements should be performed in such a way that the customer can make a reasonable assessment of whether they can afford the credit and of any risks involved.



Practical Guidance:

Firms should ensure their explanations are easily understandable and address all necessary issues. Again, firms are reminded of the need for all communications to be ‘clear, fair and not misleading’.



CONC 4.2.7

Rule Summary:

Lists some criteria for determining how a firm might go about giving the required pre-contractual information.

Explanation:

The extent of the explanations of the required pre-contractual information the firm gives might depend on:

  • The type of credit

  • The amount of credit being provided

  • The level of risk associated with the credit

  • The customer’s level of understanding of the explanations provided

  • The method by which the transaction takes place

Practical Guidance:

Firms should tailor their explanations to the circumstances of the sale and the customer’s level of knowledge.



CONC 4.2.8

Rule Summary:

Clarifies one consideration that is specifically relevant to payday lenders and similar firms.

Explanation:

In respect of payday lenders and other providers of high-cost short-term credit, the pre-contractual explanations must include an explanation of the fact that this type of lending is not suitable for longer term borrowing, and that it would be expensive for the customer were they to use this type of credit to borrow over the longer term.

Practical Guidance:

Firms to who this applies must ensure that they disclose this vital piece of information.





CONC 4.2.9

Rule Summary:

Relates to disclosing the required information when the customer indicates there is no need

Explanation:

Even if a customer states or implies that they are not concerned about receiving all of the required pre-contractual information, it must still be provided to them.

Practical Guidance:

Firms must ensure that the required information is provided to all customers.



CONC 4.2.10

Rule Summary:

Relates to not encouraging a customer to waive their rights to the required information

Explanation:

Firms must not encourage, or provide incentives for, customers to waive their rights to receive all of the pre-contractual information.

Practical Guidance:

Firms must provide the required information to all customers and not encourage them to forego their right to receive it.



CONC 4.2.11

Rule Summary:

Relates to the fact that a broker can provide the information, removing the need for the lender to do so.

Explanation:

Lenders whose customers are using brokers should still be alert to the possibility that they might need to provide the pre-contractual information. The disclosure requirements do not apply to a lender if a broker has disclosed all the required information to the customer in the correct way. However, lenders must take reasonable steps to ascertain if the broker has done this.

Practical Guidance:

Lenders must not automatically assume that a broker will provide all of the required information in every case.



CONC 4.2.12

Rule Summary:

Relates to practice to be followed when a customer requests additional information.





Explanation:

If a customer requests additional information or an explanation of the pre-contractual information, this should be provided to them swiftly and without any additional charge being levied, unless there is a good reason to require payment.

Practical Guidance:

Firms must ensure they comply with requests of this nature swiftly and without charging for the service



CONC 4.2.13

Rule Summary:

Relates to customers being asked to acknowledge information.

Explanation:

Firms must not ask customers to confirm that the required pre-contractual information has been given in accordance with these rules. The customer is most likely a layman, and they must not be asked to judge for themselves whether the firm has met its regulatory obligations.

Practical Guidance:

Firms must ensure they do not ask customers to give any sort of confirmation of this type.



CONC 4.2.14

Rule Summary:

Clarifies the above rule about asking a customer if they have understood.

Explanation:

Firms are still permitted to ask a customer if they have understood the pre-contractual information, and to ask them to acknowledge that they have provided it. However, they cannot ask the customer to certify that the explanation was adequate.

Practical Guidance:

Firms should always check their customers’ understanding of key concepts, but without asking them to confirm that they have definitely received adequate information.



CONC 4.2.15

Rule Summary:

Details contractual information which must be disclosed, on top of that in CONC 4.2.5, in special cases.



Explanation:

In addition to the information required in CONC 4.2.5, the lender and/or broker must disclose additional information in certain circumstances.

Requirements for credit token agreements include:

  • Where different interest rates and/or charges apply to different elements of the credit, this must be stated

  • A statement of the implications of only making minimum repayments

  • A statement that interest rates may increase

  • A statement that the interest rate offered may be higher as a result of any risks an individual customer is deemed to pose

  • The limitations that apply to any special offer, such as a zero interest or low interest initial period

  • Any fees, charges or other conditions applying to balance transfers

For credit card cheque arrangements, details must be given of the higher costs that apply, relating these to the costs associated with credit card payments.

For home credit and high-cost short-term credit (such as payday loans), details must be given of the implications of re-financing the loan agreement, or extending the repayment term.

For bill of sale (legal documents that record the sale of particular property) agreements, the following disclosure requirements apply:

  • That there is a risk of losing the asset that is the subject of the bill of sale, and the implications of this

  • That a court order is not required in order for the lender to re-possess the asset

  • That the debt may not be cleared in full even if re-possession takes place

  • That re-possession can still take place once the customer has repaid more than one third of the total amount repayable, unlike hire purchase and conditional sale agreements

For hire purchase and conditional sale agreements, the following disclosure requirements apply:

  • That the customer will not own the assets on which the loan is secured until all repayments have been made, and other conditions satisfied

  • That a court order is not required in order for the lender to re-possess the asset, unless at least one third of the total amount payable has been repaid

Where debt consolidation is taking place, the following disclosure requirements apply:

  • If a higher rate of interest and/or charges will apply as a result of the consolidation, this must be stated. (It is appreciated that in some cases the lender or broker may not know the full details of the debts to be consolidated).

  • That the term over which the debt will be repaid will increase

  • That the consolidation loan will be secured on the customer’s property

For a guarantor loan, the requirement to provide a guarantee must be stated.

Practical Guidance:

Firms should identify the special disclosure requirements which apply to any credit agreement they are entering into, and ensure that these are applied.



CONC 4.2.16

Rule Summary:

Relates to information disclosure to customers without a good command of English.

Explanation:

If a firm identifies that a customer does not have a good command of the English language, it should consider whether an alternative method of providing the pre-contractual information is desirable. For example, a friend or relative who does have a good command of English could be called in to assist.

Practical Guidance:

Firms should be on the lookout for any customers who appear to be struggling to understand information provided, and to suggest that a friend, relative or other person assists in these circumstances



CONC 4.2.17

Rule Summary:

Suggests providing a telephone contact to customers using electronic means.

Explanation:

By their very nature, electronic transactions do not involve dialogue between the firm and the customer. This means it can be difficult, if not impossible, to ascertain if a customer is having difficulty understanding information, whether this is due to their poor command of English, mental capacity issues or any other reason. Firms should therefore strongly consider providing a telephone contact number to all their customers, which should not be a premium rate number.

Practical Guidance:

Firms should endeavour to provide a telephone contact number for all customers, including those conducting transactions electronically.



CONC 4.2.18

Rule Summary:

Suggests how the right to request additional information may be satisfied for customers using electronic means.

Explanation:

Providing a telephone contact number or access to a comprehensive online Frequently Asked Questions facility could satisfy the requirement to provide additional information to customers who request it.

Practical Guidance:

Firms should ensure that at least one of the options referred to above is available to all customers.



CONC 4.2.19

Rule Summary:

Relates to the way the required information should be provided to customers using electronic means.

Explanation:

The required disclosure information should be provided on the screens that a customer using electronic means would visit. Firms should not simply provide a link to this information if it would be possible for a customer to conclude their agreement without visiting any one of the links.

Practical Guidance:

Firms should ensure that all of the required information is contained on the actual screens / web pages that a customer using electronic means would visit.



CONC 4.2.20

Rule Summary:

Relates to the need to provide oral clarification of customer queries in certain circumstances.

Explanation:

Where customers are conducting their transaction via telephone, or face-to-face, firms should be prepared to provide explanations orally when customers request additional information. They should not simply issue a written explanation, or refer the customer to a standard document.

Practical Guidance:

Firms should be willing to explain matters of doubt or concern orally, perhaps in addition to confirming these in writing.



CONC 4.2.21

Rule Summary:

Refers to one issue relating to variations of existing credit agreements.





Explanation:

If the credit agreement involves a modification of an existing agreement, then all of the information required by chapter 4.2 must be provided before the agreement is entered into.

Practical Guidance:

Firms should ensure that all required information is provided at the earliest possible stage where the transaction involves a modification of existing credit.



CONC 4.3 Adequate explanations: P2P agreements

CONC 4.3.1

Rule Summary:

Clarifies when chapter 4.3 applies.

Explanation:

Chapter 4.3 applies to firms operating electronic systems in relation to peer-to-peer lending activities.

Practical Guidance:

All peer-to-peer lending firms need to familiarise themselves with the provisions of this chapter.



CONC 4.3.2

Rule Summary:

Sets out circumstances in which the provisions of chapter 4.3 do not apply.

Explanation:

Apart from CONC 4.3.6, chapter 4.3 does not apply where the credit agreement is either for an amount in excess of £60,260, or is secured on land.

Practical Guidance:

Firms should ensure they are clear about when these rules apply and when they do not.



CONC 4.3.3

Rule Summary:

Adds a caveat to the exemptions in CONC 4.3.2.

Explanation:

Firms involved in the provision of per-to-peer credit that meets one both of the three exemptions listed in CONC 4.3.2, i.e. secured loans or loans above £60,260, nevertheless need to consider whether it is appropriate to disclose any or all of the detailed information we shall look at later in CONC 4.5.3 In particular, firms should consider disclosing information relating to the consequences of missing repayments or repaying less than required, such as the risk of re-possession.

Practical Guidance:

Even if they are covered by one of the two apparent exemptions, firms still need to consider what level of information they should disclose to their customers, bearing in mind that the FCA has high-level principles which say that customers must be treated fairly and their information needs must be considered.



CONC 4.3.4

Rule Summary:

Details the information that needs to be provided before a peer-to-peer agreement is entered into, and specifies other requirements as to how this information is delivered.

Explanation:

Where pre-contractual information is handed to the customer in person, they must be permitted to take that information away and consider it. The customer must be given the opportunity to ask questions about the agreement and be informed of how they can approach the firm for further assistance.

The required pre-contractual information, to be provided before a credit agreement is entered into, includes:

  • The required individual repayments, and where known, the total amount repayable over the term of the agreement

  • Any features of the agreement which make the credit unsuitable for particular uses

  • Any features of the agreement which could adversely affect the customer

  • Consequences of failing to make the required repayments, including charges for late payment, the impact on the customer’s credit rating and the implications for future credit applications, the possibility that legal action may be taken to recover the debt and the possibility of re-possession of the customer’s home or other security

  • Details of any right a customer has to withdraw from the agreement, together with information on when and how such a right should be exercised

The advice to the customer to consider this information, and the explanation of how they can seek further assistance, can generally be given either orally or in writing. However, if the information about unsuitable features, required payments and withdrawal rights is given either orally or distributed to the customer in person, then the information about features which could have an adverse effect, consequences of failing to make repayments and the advice to consider the disclosure information required under section 55 (1) of the Consumer Credit Act (CCA) must also be given orally.

The required information under this section of the CCA concerns the risks, the required repayment and the consequences of not making repayments.

Practical Guidance:

Firms should familiarise themselves with the information which needs to be disclosed, and ensure that it is disclosed in all cases.



CONC 4.3.5

Rule Summary:

Relates to the need to observe the requirements of the previous chapter.

Explanation:

Peer-to-peer lending companies are also required to comply with the requirements of chapter 4.2. Although this chapter sets out a series of requirements for lenders, peer-to-peer firms are required to follow these requirements as if they were the lender.

Practical Guidance:

Peer-to-peer lending firms must ensure they are familiar with CONC 4.2 as well as the specific section which relates to them.



CONC 4.3.6

Rule Summary:

Details a required risk warning for secured peer-to-peer credit agreements.

Explanation:

Credit agreements which are secured on land require the peer-to-peer lending company to prominently give the following risk warning: “YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT”

Practical Guidance:

Firms must ensure that this risk warning is given for all secured credit agreements.



CONC 4.4 Pre-contractual requirements: credit brokers

CONC 4.4.1

Rule Summary:

Explains when chapter 4.4 applies.

Explanation:

Chapter 4.4 applies to credit broking activities in relation to regulated credit agreements.

Practical Guidance:

All credit brokers should ensure they are familiar with the content of this chapter.







CONC 4.4.2

Rule Summary:

Sets out requirements for brokers to disclose their fees.

Explanation:

Brokers must disclose to the customer any fee which applies for providing their services.

Before any agreement is entered into, the broker and customer must agree the amount of this fee, and a copy of the fee agreement must be given to the customer in a durable medium (a format which allows the customer to take away the agreement and consider its provisions).

If the broker relies on the lender to calculate the Annual Percentage Rate, will charge the lender a fee for this and will then pass this fee on to the customer, the amount of this fee must be disclosed to the lender.

Brokers must inform their customers of when the fee is payable, and how it will be payable (e.g. via deduction from the contract, via cheque etc.). Customers must also be informed of the circumstances in which a refund of this fee may be available. This includes an explanation of section 155 of the Consumer Credit Act, which requires brokers to refund their fee, less £5, if the customer has not effected credit within six months of the date their details are referred by the broker.

Practical Guidance:

Brokers must ensure they disclose all of their fees in a clear and transparent manner, and that they understand all of the rules relating to fee disclosure.



CONC 4.4.3

Rule Summary:

Relates to provision of credit broking information notices.

Explanation:

A credit broker cannot request or take a fee or charge unless it complies with all of the conditions in this rule. This also applies to any fees to be paid to third parties.

Firstly, the firm must provide a credit broking information notice, which communicates the following information to the customer in a durable medium (a format which allows the customer to take away the agreement and consider its provisions):

  • The full legal name of the firm as it appears in the Financial Services Register

  • A statement that the firm is a broker and not a lender (or if the firm also acts as a lender, a statement that it is acting as a broker for the purposes of this transaction)

  • That the customer is required to, or may be required to, pay a fee or charge for the firm’s services

  • The amount of the fee or charge, or where this is not known, the basis on which it will be calculated

  • When the fee or charge is payable, and details of the method by which the payment will be collected (e.g. via deduction from the contract, via cheque etc).



(Apart from the firm’s trading name and contact details, no other information should be included on the information notice).

Secondly, the firm must receive confirmation from the customer, also in a durable medium, that they have received the above information and are aware of its contents.

The firm must maintain records of each information notice, and the associated customer confirmations.

Practical Guidance:

Firms that charge fees must ensure they comply with all of these requirements.



CONC 4.4.4

Rule Summary:

Lists some exemptions to the requirements of CONC 4.4.3.

Explanation:

The CONC 4.4.3 requirements do not apply where a customer indicates that they wish to enter into a credit agreement secured via a mortgage on land or property, where the firm indicates to the customer that they are only prepared to carry out broking activities in respect of a loan secured on land, and where the firm does not give any indication that it is prepared to consider other forms of lending for the customer.

Practical Guidance:

Firms should ensure that these circumstances apply before they seek to rely on an exemption from the information notice requirements.



CONC 4.4.5

Rule Summary:

Provides additional guidance in respect of CONC 4.4.3.

Explanation:

Firms cannot ask for payment details from customers, such as credit or debit card information, until all of the requirements of CONC 4.4.3 have been met. This includes the need for the customer to provide an acknowledgement. This means that customers should not be able to access any webpage that asks them provide payment information until the information has been provided and the acknowledgement received.

CONC 4.4.3 applies to all fees and charges payable to the firm by the customer, including anything described by a different name, such as a ‘membership fee’ or a ‘web information fee’. It also applies to cases where the fee is paid for by credit.

Firms must note the requirement not to include any information that is not required on the information notice, apart from the firm’s trading name and contact details.

Providing the information on a web page does not meet the ‘durable medium’ requirement.

The information on the notice must be clear and concise and written in plain English.

Where one broker introduces a customer to another, the second broker must also issue the notice and obtain an acknowledgement before any fees can be obtained.



CONC 4.5 Commissions

CONC 4.5.1

Rule Summary:

Sets out when chapter 4.5 applies.

Explanation:

CONC 4.5.2 applies to lenders and CONC 4.5.3 and CONC 4.5.4 to brokers who handle credit agreements and consumer hire agreements.

Practical Guidance:

Both lenders and brokers should ensure they understand the provisions of this chapter.



CONC 4.5.2

Rule Summary:

Explains the specific circumstances in which lenders can enter into commission arrangements.

Explanation:

A lender must not enter into a commission arrangement with another firm unless it can be justified on the basis that the firm in question needs to undertake extra work in connection with the business to which the commission relates.

Practical Guidance:

Lenders should be very wary of entering into commission arrangements.



CONC 4.5.3 & CONC 4.5.4

Rule Summary:

Relates to disclosure of commission by brokers.

Explanation:

A broker should always disclose the amount of commission they receive from a lender on a credit agreement or consumer hire agreement when a customer asks about this.

If the payment of the commission could impact in any way on the firm’s impartiality when recommending a particular credit product, or has a bearing on the customer’s decision as to whether to proceed, then the amount of the commission must always be disclosed, even if the customer does not ask for it. This information must be provided to the customer in good time before the credit agreement or consumer hire agreement is entered into.

Practical Guidance:

Brokers should be aware of when they need to disclose the commission they receive.



CONC 4.6 Pre-contract disclosure: continuous payment authorities

CONC 4.6.1

Rule Summary:

Explains which firms chapter 4.6 applies to.

Explanation:

Chapter 4.6 applies to lenders, consumer hire firms and peer-to-peer lending firms.

Practical Guidance:

All firms in these categories should ensure they are familiar with the requirements of this chapter.



CONC 4.6.2

Rule Summary:

Explains the information which must be disclosed regarding continuous payment authority (CPA).

Explanation:

CPA is a facility under which a firm, once a loan repayment is due, can make requests for payments from a customer’s bank account in order to make the required repayments.

The following information about CPA must be provided to the customer before the credit agreement, consumer hire agreement or peer-to-peer agreement, as applicable, is entered into:

  • What CPA is and how it works

  • How the firm will use CPA

  • For providers of high-cost short-term credit, such as payday lenders, that CPA can only be used twice in respect of each repayment instalment (or twice in total if the loan only requires one repayment), and can only be used to collect either the full amount due, in the case of a single repayment, or the full amount of an instalment. (See the permitted exception below though, when the customer consents to part payment being taken.)

  • How a CPA can be cancelled by the customer

  • Whether alternative payment options are available, and what these are

  • Whether an alternative repayment date is available

  • The consequences for the customer if sufficient funds are not available on the date CPA is used

  • Whether further attempts would be made to collect payment via CPA if the first such attempt was unsuccessful, and if so, when and how often these attempts would be made

  • Whether the firm might collect a part payment of the required amount using CPA, and if so, how frequently a part payment would be sought. Any minimum amount, or percentage of the amount due, applicable to this part payment facility should also be disclosed.

  • That providers of high-cost short-term credit, such as payday lenders, can only use CPA to collect part payment if the firm and customer have agreed to this and the customer has been informed of how much will be taken in part payment and when

  • Whether fees and charges will be incurred by using CPA, and if so, the amount of these fees or charges, how they are calculated and the circumstances in which they may be charged

Practical Guidance:

Firms who use CPA must ensure that they provide all of this information before the agreement is entered into



CONC 4.6.3

Rule Summary:

Explains the need to refer to CPA in the agreement documentation.

Explanation:

The terms and conditions relating to CPA must be included in before the credit agreement, consumer hire agreement or peer-to-peer agreement, as applicable.

Practical Guidance:

Firms who use CPA must ensure that information concerning it appears in their agreements with borrowers.



CONC 4.6.4

Rule Summary:

Explains the need to explain CPA clearly.

Explanation:

Firms must clearly explain how CPA works in plain English.

Practical Guidance:

Firms should review the way they explain CPA and consider whether it meets the ‘clear, fair and not misleading’ requirement.



CONC 4.7 Information to be provided on entering a current account agreement

CONC 4.7.1

Rule Summary:

Clarifies to which firms chapter 4.7 applies.

Explanation:

Chapter 4.7 applies to consumer credit lenders.

Practical Guidance:

Lenders who offer current account overdraft facilities should familiarise themselves with this chapter.



CONC 4.7.2

Rule Summary:

Details the information that needs to be provided to customers who enter into overdrafts.

Explanation:

Where a customer enters into an overdraft agreement on a current account, whereby it is possible for them to either go overdrawn without permission or exceed a previously agreed overdraft limit, then the following information needs to be provided to the customer:

  • The rate of interest charged on the amount of unauthorised overdraft

  • Any conditions relating to that interest rate

  • Any reference interest rate on which the overdraft interest rate is based

  • Any changes that may apply to the interest rate stated, including any limited time periods for which the initial interest rate is valid, and details of the procedure the firm will follow for changing the rate

  • Any other charges payable, together with details of the circumstances in which these charges would be levied

Where different rates of interest apply to the overdraft in different circumstances, the disclosure requirements listed above apply separately to each different interest rate.

Practical Guidance:

Firms must ensure that all of this information is provided.













CONC 4.8 Pre-contract: unfair business practices: consumer credit lending

CONC 4.8.1

Rule Summary:

Clarifies to which firms chapter 4.8 applies.

Explanation:

Chapter 4.8 applies to all firms engaged in lending activity.

Practical Guidance:

Lenders must ensure they are familiar with the content of this chapter, and what practices are considered unfair.



CONC 4.8.2

Rule Summary:

Relates to providing incentives without giving customers time to consider the terms and conditions.

Explanation:

A firm must not try and induce, encourage or persuade a customer to complete their credit agreement quickly. Customers must instead be given sufficient time to consider the pre-contractual information, which was explained at length earlier in Chapter 4.

Practical Guidance:

Firms must ensure no customer is unduly encouraged to complete their loan application before they have been able to properly consider whether they wish to proceed. Offering an inducement, financial or otherwise, to complete quickly is especially frowned upon.



CONC 4.8.3

Rule Summary:

Clarifies the restriction in CONC 4.8.2.

Explanation:

Firms are still entitled to set end dates for promotions, and doing so will not by itself contravene the requirement in CONC 4.8.2 not to provide inappropriate incentives.





Practical Guidance:

Firms are entitled to run promotions for limited periods, but must ensure that all customers, whether they are seeking to benefit from the terms of that promotion or not, are given sufficient time to consider the terms and conditions.



CONC 4.8.4

Rule Summary:

Relates to providing incentives to borrow more money.

Explanation:

Firms must not inappropriately encourage or incentivise customers to borrow more than they have asked for.

Practical Guidance:

Firms must ensure that no customer is ever encouraged to borrow more than they have requested, except in the circumstances explained in CONC 4.8.5 below.



CONC 4.8.5

Rule Summary:

Explains some circumstances in which it may be appropriate to offer additional credit to customers.

Explanation:

It is not unfair to offer a customer more credit than they have requested, provided that no pressure is exerted on them to accept the higher offer, and no incentives are provided to do so. Such customers must be subject to a suitably robust creditworthiness assessment. It may be particularly appropriate to offer additional credit where more advantageous prices, terms or conditions are available on larger loans, and where these better terms are clearly explained.

Practical Guidance:

Firms must ensure that all of the requirements listed in this rule apply before they consider offering a customer additional credit.



CONC 4.8.6

Rule Summary:

Relates to statements or implications that repayments will be reduced via a new credit agreement.

Explanation:

Firms must not state or imply that a new credit agreement will reduce a customer’s debt repayments when one credit agreement with the same term replaces another previous agreement, unless this actually is the case.

Practical Guidance:

Firms should refrain from stating or implying this when it is not the case.



CONC 5.1 Application

CONC 5.1.1

Rule Summary:

Clarifies when chapter 5.1 applies.

Explanation:

Chapter 5.1 applies to all firms engaged in lending activity, except where stated otherwise.

Practical Guidance:

All lenders should take note of the content of this chapter.



CONC 5.2 Creditworthiness assessment: before agreement

CONC 5.2.1

Rule Summary:

Explains the requirements for carrying out credit checks.

Explanation:

Except in certain limited circumstances, lenders need to carry out creditworthiness checks on their customers. The requirements set out in CONC 5.2.1 do not apply where the agreement is secured on land, or where it is a pawnbroking arrangement. They also do not apply to small borrower-lender-supplier agreements, or to overdrafts unless they occur under an authorised overdraft agreement.

The two key elements of a creditworthiness assessment are the customer’s ability to make the required repayments over the term of the agreement (or for a reasonable period where the term is open-ended) and the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

All information the firm requires to carry out the creditworthiness assessment should be obtained from the customer and/or a credit reference agency, as necessary.

Practical Guidance:

Firms must carry out a credit assessment of all potential borrowers that allows them to gain a full picture of the level of risk lending to that customer would entail.







CONC 5.2.2

Rule Summary:

Clarifies when the credit check requirements apply for agreements excluded under CONC 5.2.1.

Explanation:

CONC 5.2.1 does not cover unauthorised overdrafts or secured loans. However, while no form of credit check is required for an unauthorised overdraft, a check of sorts is still required for secured loans, whether they are secured on land or are pawnbroking arrangements. Firms still need to assess the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

Practical Guidance:

Firms should ensure that an adequate suitability check is carried out on all potential borrowers, even if a full credit check is not carried out.



CONC 5.2.3

Rule Summary:

Explains the required scope of creditworthiness assessments.

Explanation:

Credit checks may need to take into account:

  • The type of credit being offered

  • The amount to be borrowed

  • The total cost of the credit

  • The customer’s financial position at the time of the application

  • The customer’s previous credit history, including any evidence of current or previous financial difficulties

  • The customer’s existing financial commitments, such as repayments on other credit, rent, council tax and utilities

  • Future commitments of the customer that can reasonably be foreseen at the time of the application

  • Future changes in customer circumstances which can be reasonably foreseen, and which would have a significant adverse impact on their financial situation

  • Any evidence that the customer would be classed as a ‘vulnerable customer’, particularly if they display evidence of mental capacity problems





Practical Guidance:

Firms must ensure that all of the factors listed here are considered where relevant. Lending should only take place to a customer who the firm reasonably expects to be able to meet their repayment obligations, both now and in the future.



CONC 5.2.4

Rule Summary:

Adds a caveat to CONC 5.2.3.

Explanation:

Despite the list of factors to consider in CONC 5.2.3 above, the rules go on to say that to insist that all these issues are considered in every case would be disproportionate.

The type of credit being offered, the amount of credit and the risks associated with the proposed agreement should all be used to determine exactly how rigorous a credit assessment would need to be. A particularly rigorous assessment would be expected to take place when the credit would be secured on the customer’s home.

Information which might need to be considered in a credit check includes:

  • Any previous dealings the customer has had with the firm

  • Evidence of income

  • Evidence of expenditure

  • The customer’s credit score (credit rating)

  • A report from a credit reference agency

  • Information provided by the customer

Practical Guidance:

Firms should carefully consider the risks posed by any proposed credit, and conduct more comprehensive credit checks where higher risks exist.



CONC 5.3 Conduct of business in relation to creditworthiness and affordability

CONC 5.3.1

Rule Summary:

Explains some key concepts relating to creditworthiness checks and affordability assessments.

Explanation:

An affordability assessment should go beyond whether the customer can afford the repayments. They may be in a position to make repayments, but if doing so would have a significant adverse effect on their financial situation, then the proposed credit is unlikely to be suitable.

Expected future changes in income or expenditure, whether they involve increases or decreases, can be taken into account in affordability assessments if evidence of these expected changes is available. If it would be expected that a customer’s expenditure would rise in the future for any reason (e.g. new mortgage, birth of a child etc), then the proposed credit should only be granted if the required repayments are expected to be sustainable once the increase in expenditure has occurred.

The same applies if a fall in income is expected. Reasons for this might include retirement or impending loss of a job.

Evidence of income and expenditure should be sought, and it will not normally be sufficient to rely solely on information supplied by the customer in this respect. Income may be verifiable via bank statements, payslips, tax returns or certified accounts, and expenditure may be verifiable via bills, statements, bank statements etc.

In most cases, the required repayments will need to be affordable based on the customer’s current income, as in almost all cases the need to make repayments will commence as soon as the agreement commences. One possible exception to this is where repayments can be deferred until income has reached a certain level, such as in the case of loans for student tuition fees.

The definition of ‘sustainable’ the FCA uses requires that:

  • The customer is able to make the required repayments and meet their other financial commitments without serious difficulty

  • The customer can continue to do this throughout the lifetime of the agreement (or for a reasonable period where it is open-ended)

  • The customer does not need to borrow further sums in order to pay off existing credit

  • The repayments can be met from income and/or savings without the need to realise any security associated with the credit

In the case of running account credit (agreements to which a credit limit applies), then assessments should be made around the customer’s ability to repay the maximum amount of credit available. It may be reasonable to consider the time it would typically take to repay a personal loan for the same amount as the credit limit when deciding what the ‘reasonable period’ referred to above might be. Assessments should never be made based on the minimum required payment.

The level of the credit limit granted to a customer must be based on the results of a suitably rigorous creditworthiness assessment and on what level of repayment the customer could reasonably be expected to afford without experiencing serious difficulties.

Lenders are encouraged to share information on a customer’s record of repaying their credit obligations with other lenders and with credit reference agencies.

Practical Guidance:

Firms should ensure their credit and affordability checks comply with these requirements.



CONC 5.3.2

Rule Summary:

Relates to the need to have procedures in place for assessing creditworthiness.

Explanation:

Firms should have policies and procedures for assessing creditworthiness.

Practical Guidance:

Firms should have a documented procedure explaining how they go about establishing creditworthiness of applicants, and ensure that this procedure is followed in all cases



CONC 5.3.3

Rule Summary:

Relates to the checking of information supplied in connection with a creditworthiness assessment.

Explanation:

When a firm gathers information to assist with its decision on the creditworthiness of an applicant, it needs to take reasonable steps to verify that this information is correct. This particularly applies to any information supplied by the customer themselves.

Practical Guidance:

Firms should check information received wherever possible. Income may be verifiable via bank statements, payslips, tax returns or certified accounts, and expenditure may be verifiable via bills, statements, bank statements etc. Information about credit history might be available from a credit reference agency.



CONC 5.3.4

Rule Summary:

Relates to the requirement to carry out proper checks and not rely on the security for the loan.

Explanation:

Firms are required to carry out credit and affordability checks as previously documented. They cannot simply rely on the fact that security has been provided to determine that the loan is suitable. The only permitted exception to this is in a pawnbroking arrangement when the customer’s liability (inclusive of interest, fees and charges) is no more than the market value of the article provided as security.

Practical Guidance:

Firms should always take care to carry out proper credit and affordability checks.



CONC 5.3.5

Rule Summary:

Relates to offering more credit to a customer than originally requested.



Explanation:

A lender must not encourage, advise or induce a customer to take more credit than they originally requested if the results of credit and/or affordability assessments indicate that the repayments associated with the higher amount of credit would not be sustainable.

Practical Guidance:

Firms must ensure that advice or inducements of this nature are not given.



CONC 5.3.6

Rule Summary:

Sets out one rule relating to completion of credit applications.

Explanation:

If a firm completes all or part of a credit application on behalf of a customer, then either the customer must give their consent for this, or the customer shall be allowed to check the application before being asked to sign it.

Practical Guidance:

Firms must ensure customers are given sufficient time to check credit applications before being asked to sign them.



CONC 5.3.7

Rule Summary:

Relates to knowing or suspecting a customer has provided incorrect information.

Explanation:

If a firm knows, or has reason to suspect, that a customer has supplied incorrect information regarding their creditworthiness and/or their ability to afford the required repayments, then that customer’s application for credit must not be accepted.

Practical Guidance:

Firms need to carry out reasonable checks as to the accuracy of information supplied by the customer, and must adopt a zero-tolerance approach to any information known or suspected to be, inaccurate.



CONC 5.3.8

Rule Summary:

Gives an example to clarify CONC 3.5.7.



Explanation:

If a customer supplies income or expenditure information which is inconsistent with evidence available from other sources, then this would be grounds for not accepting the application, as explained in CONC 3.5.7.

Practical Guidance:

Firms should always check information supplied by the customer with that available from external sources, and be prepared to take action if there are any discrepancies.



CONC 5.4 Conduct of business: credit brokers

CONC 5.4.1

Rule Summary:

Clarifies when chapter 5.4 applies.

Explanation:

Chapter 5.4 applies to credit broking activities.

Practical Guidance:

Brokers must ensure they are familiar with the content of this chapter.



CONC 5.4.2

Rule Summary:

Relates to considering the customer’s circumstances when giving advice.

Explanation:

When giving advice, making recommendations or explaining products, brokers should consider all applicable information regarding the customer’s needs and circumstances. This includes considering whether the customer can afford the required repayments, and whether anything they know, or reasonably ought to know, about the customer might make the proposed contract unsuitable.

Practical Guidance:

Brokers should ensure that a comprehensive assessment of whether a credit product is suitable for a customer takes place, and that customers are only advised to enter into contracts which are suitable for then.



CONC 5.4.3

Rule Summary:

Relates to being transparent with the customer as to how many providers a broker will consider products from.

Explanation:

If a broker has informed a customer that it will search all or part of the relevant market to find the most suitable product, then it must perform this search to the extent promised. There is nothing wrong with only offering credit products from one provider, as long as the broker has been clear about this from the outset.

Practical Guidance:

Firms must be clear as to whether they can offer products from just one provider, from a panel of selected providers or from all providers. They must then recommend the most suitable product from those available, considering the customer’s needs and circumstances. If a firm cannot offer a suitable product, it must not make a recommendation.



CONC 5.5 Creditworthiness assessment: P2P agreements

CONC 5.5.1

Rule Summary:

Sets out which firms chapter 5.5 applies to.

Explanation:

Chapter 5.5 applies to firms that operate an electronic system in order to facilitate peer-to-peer lending.

Practical Guidance:

All peer-to-peer lending firms should ensure they are familiar with the requirements of this chapter.



CONC 5.5.2

Rule Summary:

Clarifies some definitions for terms used in respect to peer-to-peer lending.

Explanation:

Chapter 5.5 applies to firms who facilitate the peer-to-peer lending activity by maintaining a platform or similar. Such firms are not subject to the detailed requirements in CONC 5.2 that apply to lenders.

A lender in a peer-to-peer agreement is likely to be subject to the rules of CONC and the Consumer Credit Act if they lend money via the peer-to-peer platform in the course of their normal business activities. In these circumstances, a peer-to-peer lending agreement would constitute a regulated credit agreement.

Practical Guidance:

Firms should satisfy themselves as to which parts of the rulebook apply to them. Those who lend money under peer-to-peer agreements should ask themselves if they lend in the course of normal business activities, and hence whether they are likely to be subject to the CONC rules.



CONC 5.5.3

Rule Summary:

Explains the credit checking responsibilities of peer-to-peer lending firms.

Explanation:

Although the peer-to-peer firm is not itself the lender, it must still carry out a rigorous assessment of the creditworthiness of each potential borrower.

The two key elements of a creditworthiness assessment are the customer’s ability to make the required repayments over the term of the agreement (or for a reasonable period where the term is open-ended) and the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

All information the firm requires to carry out the creditworthiness assessment should be obtained from the customer and/or a credit reference agency, as necessary.

The only potential exemption to this requirement is where the per-to-peer lending assessment involves a pawnbroking arrangement, for the requirements that apply here, see CONC 5.5.6 below.

Practical Guidance:

Peer-to-peer firms must ensure they carry out sufficient credit checks on all prospective borrowers.



CONC 5.5.4

Rule Summary:

Explains that peer-to-peer firms are subject to the same rules on creditworthiness and affordability as lenders.

Explanation:

Although the peer-to-peer firm is not itself the lender, it must still comply with the requirements of CONC 5.3 as if it were the lender.

Practical Guidance:

Peer-to-peer firms must ensure they are familiar with the requirements of CONC 5.3 as well as those in this chapter.



CONC 5.5.5

Rule Summary:

Relates to firms’ need to consider sufficient information in a creditworthiness check.

Explanation:

A firm must gather and evaluate such information as is necessary to allow it to carry out a rigorous credit check as required by CONC 5.5.3.

Practical Guidance:

Firms should ensure they gather as much information as possible from the customer themselves, credit reference agencies and other sources.



CONC 5.5.6

Rule Summary:

Explains the creditworthiness requirements when a pawnbroking arrangement is associated with a peer-to-peer agreement.

Explanation:

Where a pawnbroking arrangement is associated with a peer-to-peer agreement, the firm’s creditworthiness assessment must include consideration of the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

A peer-to-peer lending firm must also comply with the requirements of CONC 5.3 as if it were the lender with regard to assessing creditworthiness and affordability

Practical Guidance:

Peer-to-peer firms must ensure they are familiar with the requirements of CONC 5.3 as well as those in this chapter.



CONC 5A.1 Application, purpose and guidance

CONC 5A.1.1

Rule Summary:

Sets out when chapter 5A applies.

Explanation:

Chapter 5A applies to all high-cost short-term loans entered into on or after January 2 2015. It also applies to all variations or supplements to high-cost short-term loans entered into on or after this date, which impose one or more charges on the customer. In addition, it applies to any agreement entered into on or after this date that varies or supplements an existing high-cost short-term loan.

Practical Guidance:

Firms offering high-cost short-term loans (such as payday loans) must ensure they are familiar with the rules in this chapter.



CONC 5A.1.2

Rule Summary:

Clarifies CONC 5A.1.2

Explanation:

Variations and supplements to existing high-cost short-term loans are covered by the provisions of this chapter if they result in existing charges being increased, or in new charges being imposed. An example would be where the loan term is extended and additional interest becomes payable.

Chapter 5A goes on to talk about three cost caps that relate to high-cost short-term loans – the total cost cap, the initial cost cap and the default cap. If a variation or supplement is imposed, the charges that applied to the loan before January 2 2015, when the caps came into force, will count towards the various caps. If the charges that already applied to the loan prior to January 2 2015 exceed any of the caps, then a variation or supplement to that agreement will not be permitted.

Practical Guidance:

Firms should ensure they understand the clarifications given here, particularly regarding when a variation or supplement is not possible.



CONC 5A.1.3

Rule Summary:

A purely legal statement.



CONC 5A.1.4 & CONC 5A.1.5

Rule Summary:

Explains the statutory context surrounding the cost cap rules.

Explanation:

The FCA has a statutory objective to secure an appropriate degree of protection for customers. The cost cap rules are designed with this objective in mind, so that borrowers can be protected from excessive charges.

Practical Guidance:

Helps firms to understand the reasons behind the cost cap rules.



CONC 5A.1.6 & CONC 5A.1.7

Rule Summary:

Explains some of the items included in the cost cap.

Explanation:

The rules in this chapter apply to charges such as:

  • Interest payable on the loan

  • Late payment charges

  • Charges for the transmission of funds

  • Charges for early repayment, re-financing or changing the due date or termination date

  • Charges for drawing down credit

  • Charges imposed by any credit broker with whom the lender has an association

  • Charges for ancillary services

  • Interest on any of the above charges



Practical Guidance:

Firms should ensure they understand which charges the cost cap applies to.



CONC 5A.2 Prohibition from entering into agreements for high-cost short-term credit

CONC 5A.2.1

Rule Summary:

Clarifies to whom CONC 5A.2 applies.

Explanation:

CONC 5A.2 applies to lenders and brokers in respect of high-cost short-term loans, the definition of which includes payday lending.

Practical Guidance:

Lenders and brokers must ensure they are familiar with the content of this section.

 

CONC 5A.2.2

Rule Summary:

Explains the basic principle behind the total cost cap.

Explanation:

The total cost cap requires that no borrower is ever required to enter into a credit agreement for high-cost short-term credit where any one of the charges, or a combination of the charges on the agreement and any related agreement, exceed the total cost cap. If the precise level of charges is not known, then the maximum possible charge must be set within the cap.

Practical Guidance:

Firms must ensure that all agreements comply with this requirement.

 

CONC 5A.2.3

Rule Summary:

Explains the initial cost cap.

Explanation:

Under the initial cost cap, the amount the customer has to pay in interest and other charges (including payments on a connected agreement) cannot exceed 0.8% of the loan amount per day. So for example, on a £100 loan, a customer cannot be asked to repay more than £0.80 per day. This limit applies from the day the customer accesses the credit to the end of the agreement (or to the extended end date if the loan term is subsequently increased). For the purposes of this section of the rulebook, references to charges include any charges, fees or interest payments the borrower needs to pay.

Practical Guidance:

Firms must ensure that repayments are no higher than the level of this cap.

 

CONC 5A.2.4

Rule Summary:

Adds a caveat to CONC 5A.2.3.

Explanation:

Charges under the default cap, as explained in CONC 5A.2.14 below, default fees are not included in the initial cost cap.

Practical Guidance:

Firms should be aware of this, and of the separate default cap requirements.

 

CONC 5A.2.5

Rule Summary:

Clarifies CONC 5.2.3.

Explanation:

The initial cost cap is 0.8% per day, the amount given by this calculation should be multiplied by the number of days the agreement runs for. So for example, on a £100 loan, a customer cannot be asked to repay more than £0.80 per day, equivalent to £24 for a 30 day loan.

Practical Guidance:

Firms should ensure they are aware of this important qualification.

 

CONC 5A.2.6

Rule Summary:

Explains the definition of the credit amount used.

Explanation:

The figure to be used for the amount of credit, for the purposes of calculating the total cost cap, is the lower of the credit limit under the agreement, and the amount that is actually lent.

Practical Guidance:

Firms must ensure they are aware of this definition.

 





CONC 5A.2.7 & CONC 5A.2.8

Rule Summary:

Explains the effect of early repayments on the cost cap rules.

Explanation:

When calculating the initial cost cap as per CONC 5.2.3, firms cannot re-calculate this based on the amount that remains outstanding after the customer has repaid some of the sum due. The original loan amount must still be used to calculate the maximum permitted daily charge.

Practical Guidance:

Firms must ensure they follow this rule when calculating the cap.



CONC 5A.2.9

Rule Summary:

Clarifies the situation where a loan allows customers to draw down credit in several tranches.

Explanation:

If a loan allows a customer to draw down credit in several tranches, and each separate drawdown requires the lender’s approval, then the firm must treat each drawdown as a separate loan, and issue a separate credit agreement for each. The caps then applies according to the terms of each agreement individually.

Practical Guidance:

Firms must ensure that separate agreements are drawn up where necessary.



CONC 5A.2.10

Rule Summary:

Explains the relevance of the caps to re-financed agreements.

Explanation:

A firm cannot enter into a re-financed agreement if it would lead (or may lead) to the total charges on the original loan, the re-financed loan and any connected agreement being in excess of the amount borrowed. Here the reference to ‘amount borrowed’ would mean the total of the original loan and the re-financed loan. Essentially, this is saying that no high-cost short-term loan borrower should ever be asked to pay more in charges than the amount they have borrowed.

Practical Guidance:

Firms should ensure that no borrower is asked to repay more in charges than the amount they have borrowed, regardless of the fact a loan may have been re-financed.



CONC 5A.2.11

Rule Summary:

Explains the rules applying to default charges on re-financed agreements.

Explanation:

A firm cannot enter into a re-financed agreement if it would lead (or may lead) to the charges imposed for breaches of the agreement (default fees) on the original loan, the re-financed loan and any connected agreement totalling more than £15. See more on default fees in CONC 5A.2.14 below.

Practical Guidance:

Firms should ensure that all re-financed loans comply with this limit.



CONC 5A.2.12

Rule Summary:

Adds a caveat to CONC 5A.2.10.

Explanation:

In the event that a firm puts in place a new agreement which replaces an earlier credit agreement, and the payment due date on the new agreement is earlier than on the old agreement, then any charge under the earlier agreement which is never paid as a result can be disregarded for the purposes of CONC 5A.2.10 (ensuring borrowers do not have to repay more in charges than the amount of the loan).

Practical Guidance:

Firms should take note of the circumstances that must apply for this exemption to be relied upon:



CONC 5A.2.13