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Consumer credit regulation may be taken from the OFT
Wednesday 28th July 2010Consumer credit providers could be about to see some huge changes, as the Treasury reveals it may move the regulation of the industry from the Office of Fair Trading (OFT) to a brand new body.
The proposed changes to the UK’s financial regulation system were publicised in the Treasury’s consultation paper, released yesterday, which outlines the coalition government’s aim to restore trust and confidence in the sector.
In consultations over a major reshuffle of the system, the Treasury will look at whether the responsibility for consumer credit, which is currently regulated by the OFT, should be moved to a new body called the Consumer Protection and Markets Authority (CPMA).
The CPMA, described by the Treasury as a “strong consumer champion”, will have a dedicated focus on the importance of proper conduct to ensure greater clarity and confidence in the financial markets.
The conduct regulator, which will focus on the two aspects of consumer protection and market integrity, will be responsible for a wide range of firms from small high street businesses to wide-scale investment banks.
This is part of the Treasury’s aim to bring consumer credit under a single regime, after it admitted that the overlap of the FSA and OFT can cause ‘confusion and irregularities’.
Over 16,000 firms are jointly regulated by the two bodies, while the FSA is responsible for 29,000 and the OFT has 99,000 firms under its arm.
Kevin Still, debt expert and director of debt solutions provider, EuroDebt, owned by The Pentagon Group, said:“There is a high degree of overlap, but many businesses have diversified to offer a wider range of services which not only includes the provision of consumer credit, but also a range of ancillary and specialist services.”
Mr Still added: “The Pentagon Group, which incorporates Atlantic Finance Management, is jointly regulated because it offers debt solution services, and also Accident, Sickness and Unemployment insurance to indebted customers wishing to protect their income.”
The Treasury’s paper also reveals that the FSA will eventually be broken up and replaced by the CPMA and another new body, the Prudential Regulation Authority (PRA), which will both be overseen by the Bank of England.
The Treasury said that the FSA has too much work on its hands, being entirely responsible for all financial regulation. It currently deals with both prudential health and conduct of business regulation, which require very different approaches.
The Bank of England will also be given the tools to carry out more responsibility through a Financial Policy Committee which will be in charge of macro-prudential regulation.
In a speech at the London Stock Exchange yesterday, Financial Secretary to the Treasury, Mark Hoban, reiterated the need for strong regulation to act as the “bedrock that prevents the ground from caving in.”
He said: “The Coalition Government is delivering on its commitment to reform the financial system, to avoid repeating the mistakes of the recent financial crisis and to ensure that taxpayers are protected.
“Today is a crucial milestone in our program of reform.”
The Treasury is welcoming input from people involved in the financial services industry before the consultation closes on 18 October.
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