The FCA introduced changes to the Consumer Credit Source Book from 4 November 2024. For consumer credit firms, the important changes to review are:

• CONC 1.1 – Application and purpose
• CONC APP 1.2 – Total charge for credit rules for other agreements
• CONC 5.2A – Creditworthiness assessment
• CONC 6.7 – Post contract: business practices
• CONC 7.2 – Clear, effective and appropriate policies and procedures in respect of customers in or approaching arrears or in default
• CONC 7.3 – Treatment of customers in or approaching arrears or in default (including repossessions): lenders, owners, debt collectors
• CONC 7.6 – Exercise of continuous payment authority (CPA)
• CONC 7.7 – Application of interest and charges
• CONC 7.10 – Treatment of customers with mental capacity limitations

The FCA is also careful to remind firms of the Principles for Business within the new updates.

Key points to take away are that customers can now not be “particularly” vulnerable. The handbook details a more holistic approach for creditworthiness assessments which may indicate the customer has recently experienced or is likely to experience financial difficulties or whether the customer is vulnerable from mental health difficulties or mental capacity limitations shown in the assessment. Credit cards and retail revolving credit do not escape the update with further guidance in relation to financial difficulties.

The FCA’s focus is once again on firms’ policies and procedures. Attention should be given to your policies, particularly how you deal with customers who are approaching arrears and default or vulnerable customers. Importantly, CONC 7.2.4R means that it is a rule that you review at appropriate intervals the effectiveness of your arrears and default policies and compliance with the same. You may want to review your training to ensure that there are no inadvertent rule breaches.

The regulator wants more transparency on income and expenditure so customers can obtain this information and easily share it with other lenders and debt advice providers. CONC 7.3.13A encourages firms to consider the information provided to customers when approaching arrears or in ensuring it considers the individuals circumstances and their current situation in relation to that debt, options available to them and the impact of such forbearance.

The definition of ‘approaching arrears’ asks firms to consider a customer in this status when they notify you that they are at risk of not meeting one or more repayments when they fall due. You should note that they may not have missed any payments at this stage. A priority should be given to review your collections and forbearance policies to ensure that you are up to date.

The above is a taster of the regulatory changes implemented this month. Jane Blowers and Anneli Choyce are both Consultants at ALPH Legal who is an associate member of the CCTA.