Key Provisions for Consumer Credit Firms in the Consumer Credit Sourcebook (CONC)
To celebrate the launch of our CONC Guide, an easy to understand overview of CONC, I thought it would be useful to produce an overview of the key provisions in CONC which impact most consumer credit firms.
I’ll start by giving a little bit of an overview of CONC, or the Consumer Credit Sourcebook to give it it’s full title. It’s a part of the FCA Handbook which was introduced when the regulation of consumer credit was transferred from the Office of Fair Trading to the FCA in April 2014. CONC sets out the rules which must be followed by firms offering, collecting or otherwise dealing with consumer credit but CONC 7 should also be seen as strong guidance for other firms, such as Insurers, when collecting debts.
While the sourcebook largely copies provisions from the Consumer Credit Act 1974 it does also add to those provisions with the FCA’s take on matters in the areas discussed in this article. So, lets go through the key provisions!
CONC 1.3 provides high level guidance on helping customers in financial difficulty, note the word helping, I’ve included it intentionally. Gone are the days that firms would ignore a customer's circumstances in the pursuit of persuading them to repay debts as quickly as possible. Instead, firms must provide a more customer centric service which aims to pro-actively identify a customer struggling to repay at the earliest opportunity (for example a bank may identify this through transactions in a customers account) and reach out to the customer to offer help. Help is defined by the FCA as providing ‘forbearance’ which can be largely set into three categories. Firstly by sign-posting free debt advice, secondly by offering breathing space for at least 30 days in order for the customer to chat to an advisor and thirdly by working with the customer to reschedule repayments into an arrangement which is affordable for the customer. If performed correctly these steps should prevent customers slipping into a spiralling situation they cannot handle. Such a handle on their situation should help some customers with their mental health, our next key provision.
CONC 2.10 sets out some of the FCA’s expectations in relation to mental health and capacity, although such requirements are littered throughout CONC. Those included throughout could be summarised as the need to identify behaviours which could indicate customers are in difficulty (in a similar way to which firms need to be pro-active in relation to financial difficulty), reach out to the customer, ensure that GDPR is followed when recording information (the TEXAS protocol is recommended here), do everything you can to find solutions which work for the customer in their circumstances and implement those solutions. These may include signposting to other organisations such as the Samaritans, giving the customer time to deal with their situation through placing the matter on hold, finding different ways to communicate with a customer or finding someone to act on their behalf. However there are some specific steps we should, according to CONC 2.10, take. These are:
Firms should be aware of behaviours that might indicate that the customer has a mental capacity limitation, including:
unexpected and out of character decisions (particularly where the firm has an existing relationship with the customer and is aware of their previous decisions)
confusion about personal information, e.g. date of birth, address
a relative, close friend, carer or doctor raising concern
diagnosis with an impairment which led to the customer not having mental capacity to make similar decisions in the past
the customer does not appear to understand what the customer is applying for
the customer does not appear to understand information given to them, particularly the risks of entering into an agreement
the customer does no appear to retain the information given to them
the customer does not appear to be able to weigh up information to arrive at a decision
the customer does not appear to be able to communicate their decision
Firms should have in place procedures and practices that enable staff to support the customer to make an informed decision. Examples of such practices include:
Providing clear, jargon-free information, explaining the agreement in a way that the customer can understand
Allow extra time for the customer to weigh up the information
Allow extra time for the customer to make a decision
Allow the customer to make a decision at a later date
Above are two key sections, there are many others, including financial promotions, pre-contract information, creditworthiness and debt collection. We will cover these in a later article but if you cannot wait for this you can download our CONC guidance here.