In this Policy Statement we report on the main issues arising from Consultation Paper 15/33, Consumer credit: proposals in response to the CMA's recommendations on high-cost short-term credit (HCSTC) (October 2015) and publish final rules for price comparison websites comparing HCSTC products. These come into force on 1 December 2016.
Why are we publishing this policy statement?
In February 2015, the Competition and Markets Authority (CMA) published a final report on its market investigation into payday lending. This contained a package of remedies, some of which were to be implemented by the CMA, while others were recommendations to the FCA.
We set out our response to these recommendations in CP15/33, published in October 2015. In that paper, we consulted on the following proposed new rules and guidance for PCWs comparing HCSTC products.
Application: The rules would apply to firms that own or operate a website displaying any terms concerning HCSTC products, and that holds itself out to be, or describes itself as, a
price comparison service or price service, or gives the impression that it does one of those things.
Commercial relationships: The order or prominence in which products are displayed on PCWs must not be affected by commercial relationships that the PCW may have with
lenders or intermediaries.
Search functionality: PCWs must allow users to search by amount and duration of the loan.
Rankings: Firms must return relevant results based on the search criteria, and display all HCSTC products in ascending order of price by the total amount payable (TAP).
Additional advertising: Additional financial promotions, such as sponsored links, should not appear in or among the rankings; the results of a search must be clearly distinguishable
from other financial promotions; and guidance making clear that all results must comply with the Consumer Credit Sourcebook (CONC)3 requirement to be clear, fair and not
misleading.
Market coverage: PCWs must list in one place on the website the brand names of lenders they compare.
We also discussed in the CP our response to the CMA’s other recommendations on:
- lead generators and credit brokers
- improving shopping around
- the use of real-time data sharing
- improving disclosure of the costs of borrowing
We received 17 responses to the consultation, which closed on 28 January 2016. Respondents
included firms, trade bodies, consumer bodies, a PCW, and a credit reference agency.
Most responses were supportive of our proposed new rules, guidance and general approach. As a result, we have decided to only make minor changes to the Instrument we consulted on to ensure our policy intention is reflected more clearly (some responses indicated a misinterpretation of our proposals).
The final text of the rules and guidance we have is in Appendix 1 of the document. These come into force on 1 December 2016. If your firm is affected, you should consider the changes you need to make.
Who should read this paper?
This Policy Statement will be relevant to:
- authorised firms with permissions relating to HCSTC lending and credit broking, including firms with interim permission
- firms that are applying for, or considering applying for, authorisation to carry out these activities
- firms offering or developing quotation search tools
- trade bodies representing consumer credit firms
This paper will be of interest to consumers and consumer organisations as the final rules we are publishing will help ensure PCWs act in a fair and transparent way, enabling consumers to compare HCSTC products and shop around more effectively.
We also provide an update on work to improve the quality and use of quotation search tools across credit markets so that consumers are more able to shop around before making a full application for credit.