Consumer credit
Section 107: Power to make further provision about regulation of consumer credit
615.The amendments to section 22 and Schedule 2 to FSMA made by section 7 enable the Treasury to make an order the effect of which would be that the provision of credit would become a regulated activity and therefore within the scope of FSMA. Section 107 confers a power on the Treasury to make further provision by order about the regulation of consumer credit. It is intended to be used as part of a package of measures to provide for the transfer of responsibility for the regulation of consumer credit from the Office of Fair trading (OFT) to the FCA. The power enables substantive provisions of the Consumer Credit Act 1974 (“CCA”) to continue to apply, notwithstanding the transfer of responsibility of regulation to the FCA. The FCA may also make rules under FSMA in relation to consumer credit, including rules which supplement and support the provisions of the CCA which continue to have effect.
616.Subsection (1) sets out the circumstances in which the power can be exercised. The power can only be used in circumstances where the Treasury have made an order under section 22 of FSMA after the passing of the Act which has the effect that an activity (a “transferred activity”) ceases to be an activity for which a licence under section 21 of the CCA is required, or would have been required but for a relevant exemption, and becomes a regulated activity for the purposes of FSMA.
617.Subsection (2) sets out what the Treasury may use the order to do, including:
to transfer OFT functions under any provision of the CCA to the FCA, for example all or some of the general functions of the OFT set out in section 1 of the CCA (paragraph (a));
to apply the enforcement powers of the FCA under FSMA (for example, section 205 (public censure) and section 206 (financial penalties)) to contraventions of the CCA (paragraph (b)). This could be used to enable the FCA to impose unlimited fines on firms for breach of a requirement imposed by or under a specified provision of the CCA;
to require the FCA to issue a statement of policy in relation to the exercise of powers conferred on it by virtue of paragraph (b). This could be used to ensure that the FCA’s enforcement policy is clear so that firms will know what powers and sanctions the FCA are likely to use;
to provide that a person may not be convicted of an offence under the CCA in relation to an act or omission which has already been the subject of sanction under FSMA (paragraph (d)). This could be used to ensure that a person cannot receive a sanction twice (once under the CCA and once under FSMA) in relation to the same action;
to transfer to the Treasury any functions under CCA previously exercisable by the Secretary of State (paragraph (e));
to provide that functions of the Secretary of State under the CCA are exercisable concurrently with the Treasury (paragraph (f));
provide for local weights and measures authorities or, in Northern Ireland, the Department of Enterprise, Trade and Investment, to exercise investigative powers under the CCA in relation to the commission or suspected commission of an offence under FSMA in relation to activities relating to consumer credit which are regulated under FSMA (paragraph (g)); and
to enable local weights and measures authorities in England and Wales or, in Northern Ireland, the Department of Enterprise, Trade and Investment to institute proceedings in England and Wales or Northern Ireland, without obtaining the consent of the Director of Public Prosecutions, for an offence under FSMA in relation to activities relating to consumer credit which are regulated under FSMA (paragraphs (h) and (i)).
618.Subsection (3) provides that where an order provides that the FCA may exercise its disciplinary powers under 205 to 206A if FSMA in relation to an act or omission that constitutes an offence under the CCA, the order must provide that a person who has been the subject of action under FSMA cannot be convicted under the CCA by reference to the same act or omission. The provision does not apply where the FCA exercises its regulatory powers, for example its power to vary or to cancel permission or to impose a requirement on an authorised person under Part 4A of FSMA.
619.Subsection (5) provides that functions to institute proceedings under subsection 2(i) may not be conferred on the Department of Enterprise, Trade and Investment without the consent of that Department.
620.Subsection (6) confers on the Treasury a power to repeal or exclude the application of any provision of the CCA in relation to a transferred activity.
621.Subsection (7) provides that in exercising their powers under this section the Treasury must have regard to the importance of securing an appropriate degree of protection for consumers and the principle of proportionality.
622.Subsection (8) provides for orders under subsection (2) to make such consequential provision as the Treasury consider appropriate, and to amend any enactment, including any provision of, or made under, the Act.
Section 108: suspension of licences under Part 3 of Consumer Credit Act 1974
623.Section 108 makes a number of amendments to Part 3 of the CCA to provide for the OFT to suspend consumer credit licences. Subsection (3) inserts a new section 32A of the CCA which provides for the OFT to suspend an individual or group licence under the CCA if during the currency of a licence it appears to the OFT to be urgently necessary for the protection of consumers that the licence should cease to have effect immediately or on a specified date. A licence may be suspended for up to 12 months. Subsection (3) also inserts a new section 32B of the CCA which provides that a suspension can last for longer than 12 months if the OFT has given notice that it is minded to revoke the licence either on or before giving the notice of suspension under section 32A or during the suspension period. Subsection (6) inserts a new section 34ZA of the CCA which provides that where a person is invited by the OFT to submit representations in relation to a licence suspension the licence holder will be given 21 days to submit written representations or give notice that he wishes to do this orally. The OFT is then obliged to reconsider the decision to suspend the licence and make a new determination, and give general notice of that decision once it has been made. There is no time limit on the OFT for doing this. Subsection (8) amends section 41 of the CCA to insert a new subsection (1ZA). This is in order to make it clear that, where the OFT has reconsidered a decision to suspend a licence (under section 34ZA) and confirmed the suspension, the 28 day appeal period runs from the decision to confirm the suspension.
