§ Mr. WoodTo ask the Chancellor of the Duchy of Lancaster whether he will make a statement on changes to the regime for regulating consumer credit.
§ Mr. MaudeI have today signed new regulations relating to consumer credit advertisements and quotations and I have also signed a commencement order under the Consumer Credit Act 1974 relating to the licensing of consumer credit businesses.
The new Consumer Credit (Advertisements) Regulations will come into force on 1 February 1990. The regulations have been substantially simplified. This should be a major benefit to both traders and enforcement bodies. At the same time, additional safeguards for consumers have been provided, including a warning about the risk of loss of the borrower's home in the event of default on a secured loan and about the risks of foreign currency 159W mortgages. The new regulations relating to consumer credit quotations will bring them into line with the advertisement regulations.
Consumer credit trade associations, consumer bodies and enforcement authorities were consulted at every stage of the revision.
The commencement order under the Consumer Credit Act 1974 will bring the licensing provisions of the Act into force for individuals, partnerships and other unincorporated businesses which have, until now, been exempt from the Act if they dealt exclusively in loans of £30 or less. From 31 July, it will be an offence to carry on such a business without having applied to the Director General of Fair Trading for a consumer credit licence.
The exemption from licensing was originally intended to reduce the burden on very small firms, but is of little practical benefit to legitimate businesses because there are few businesses which make loans only for amounts of less than £30 and which are not covered by one of the other exemptions from licensing requirement. However, the £30 exemption has proved a significant obstacle to enforcement bodies such as local authority trading standards officers. Not only do they have to prove that the trader has been engaged in moneylending, but that at least some of his agreements have been for sums of more than £30.
Traders who apply to the Director General of Fair Trading for a licence by 31 July will be able to continue to carry on this category of business as they will be deemed to be licensed until the licence application has been finally determined.
Credit brokerage businesses that are carried on by an individual, partnership or unincorporated body and that introduce customers to a source of credit exclusively for sums not exceeding £30 are still exempt from licensing.