Under the radar: how will Consumer Credit Act reform impact debtor’s rights?
Richard Holland, debt adviser at Salford Council (writing in a personal capacity) urges a response from debt advisers to the HM Treasury consultation concerning Consumer Credit Act Reform.
In recent months, HM Treasury has been seeking views on a reform of the Consumer Credit Act 1974 (hereafter ‘the Act’). This consultation closes tomorrow (17th March) and yet it has largely gone under the radar for debt advisers.
The proposed reform is the most recent stage of a series of changes since 2014 which have moved sections of the Act into Financial Conduct Authority (FCA) rules. The latest consultation is taking a broad look at the whole of the Act, and there are risks to the rights currently enjoyed by clients that debt advisers cannot afford to ignore, or take lightly.
Furthermore, the long journey which the Act eventually took to full implementation - 20 years after its genesis in the Crowther Committee of 1965 - should not leave debt advisers to feel complacent about responding now, lest they believe the new reforms may take years anyway: the credit industry has been busy lobbying for a long time to reach this apex, and will be fully responsive at every stage from now onwards.
The consultation envisages moving more sections of the Act into FCA rules. Yet, as good as they may turn out to be, the rules cannot provide the sanctions present in the Act, nor do they enable the rewriting of terms and conditions that the Act allows. Furthermore, we only have to look to the utter farce of the ‘regulation’ of the energy market under OFGEM to consider what we could lose if the reform travels in a direction many parts of the credit industry want it to.
The provisions in the Act that experts agree are most at risk are: Unfair Relationships, with Financial Ombudsman Service (FOS) and FCA rules being a weak alternative to the powers the Court has to rewrite terms and conditions; Time Orders, where FCA rules simply cannot change the term of an agreement or the interest rate, for example; and the voluntary termination of Hire Purchase agreements, a provision useful to our clients which the credit industry has been lobbying hard to remove - and because it could be difficult to replicate it within FCA rules, we may see it being restricted to cases of ‘financial difficulty’. How that may be defined and by whom remains to be seen.
We should not underestimate the extent to which the powers and sanctions of the Act underpin the approach of regulators, and even many of the informal concessions that debt advisers and their clients have enjoyed for a considerable period of time. We would do well to consider the current mechanisms of the state to sanction a business versus the envisaged future ‘rights’ under FCA rules for an individual to sue for damages: where does an adviser and their advice agency fit into this? Who bears the costs, in terms of time and expense, and at what risk?
Finally, in order to understand what lies behind the push to change the Act, it’s necessary to look at the two different periods of reform in perspective. The parallels between the respective periods of reform in the early 1970s and now are immediately evident: energy crises and concomitant economic crises; increasing industrial militancy and the prevalence of strike action. But the contrasts between these times are also stark: from joining the EEC and the Act influencing the EU Consumer Credit directive of 1979 then, to leaving the EU and igniting a ‘bonfire’ of EU rules now; from strike waves and industrial militancy collapsing a series of short-term Tory administrations then, to the biggest uptick in industrial action in decades still being way behind the peak of the 70s and 80s now, with a lumbering, zombie-like administration continuing to cause havoc over years and years.
The rise of the neoliberalist strategy over the last 50 years of capitalism underpins these parallels and contrasts: welfare provisions and consumer protections born out of a post-war crisis for capital are now being dismantled to provide new markets for private investors; via financialisation as a disciplining technique, workers are increasingly dependent on credit to make ends meet, and thereby increasingly wary of asserting their collective self-interest through industrial action and acts of solidarity, as a new study has underlined. Debt advisers would do well to reflect on this when considering what has happened to their wages and terms & conditions over the past 20 years or so: how precarious their jobs are, yet how stressful and demanding they have become too. An answer lies in defending the protections we have available to us - as debtors, advisers and workers - in order to counter the worst aspects of ‘reform’ that governments and the state offer, and to come together to build an alternative.
The ‘Reform of the Consumer Credit Act’ consultation is open for responses until 11.59 p.m. on Friday 17th March 2023 and more information can be found here https://www.gov.uk/government/consultations/reform-of-the-consumer-credit-act-consultation
WADA will be submitting a response.