CONC 5A.5 Consequences of contravention of the cost caps
Application
This section applies to:
- (1)
a firm with respect to consumer credit lending;
- (2)
a firm with respect to debt administration;
- (3)
a firm with respect to debt collecting; or
- (4)
a firm with respect to operating an electronic system in relation to lending.
Contravention of cost caps and unenforceability of agreements and obligations
Where:
- (1)
a firm enters into an agreement for high-cost short-term credit in contravention of a rule in CONC 5A.2; or
- (2)
a firm facilitates an individual becoming a borrower under an agreement for high-cost short-term credit in contravention of a rule in CONC 5A.4; or
- (3)
a firm within CONC 5A.5.1 R (1) imposes a charge in contravention of a rule in CONC 5A.3; or
- (4)
a firm within CONC 5A.5.1 R (4) imposes a charge on behalf of a lender in contravention of a rule in CONC 5A.3; or
- (5)
a firm within CONC 5A.5.1 R (2) or CONC 5A.5.1 R (3) on behalf of a firm within CONC 5A.5.1 R (1) or CONC 5A.5.1 R (4) imposes a charge in contravention of a rule in CONC 5A.3:
- (a)
the agreement is unenforceable against the borrower; and
- (b)
the borrower may choose not to perform the agreement and if that is the case:
- (i)
at the written or oral request of the borrower, the lender must, as soon as reasonably practicable following the request and in any case within 7 days of the request, repay to the borrower any charges paid by the borrower under the agreement or confirm by notice in writing to the borrower that there are no charges to pay;
- (ii)
where the lender complies with (i), the borrower must repay any credit received by the borrower under the agreement to the lender within a reasonable period from the day on which the charges in (i) are received by the borrower or the day on which the notice of confirmation in (i) is received; and
- (iii)
in any case, the lender must not demand payment of the sum in (ii) in less than 30 days from the day in (ii).
- (i)
- (a)
Where an agreement for high-cost short-term credit provides for or imposes one or more charges that alone or in combination exceed or are capable of exceeding an amount set out in CONC 5A.2 or CONC 5A.3:
- (1)
the agreement is unenforceable against the borrower to the extent that such a charge or such charges exceed or are capable of exceeding that amount; and
- (2)
the borrower may choose not to perform the agreement to that extent and if that is the case at the written or oral request of the borrower, the lender must, as soon as reasonably practicable following the request and in any case within 7 days of the request, repay to the borrower any charges to the extent in (1) paid by the borrower under the agreement or confirm by notice in writing to the borrower that there are no charges to that extent to pay.
What is a reasonable period for the borrower to repay the credit depends on the circumstances of the case, including the terms for repayment under the agreement. Where the agreement provided for repayment in instalments, the firm should consider issuing the borrower with a schedule for repayment under which the firm would collect the credit in instalments at the same periodic intervals as under the agreement.
Firms are reminded that Principle 6 applies to how they deal with borrowers in relation to repayment of the credit required by CONC 5A.5.2 R. The FCA would expect firms to take into account the financial situation of the borrower in considering what is a reasonable period for repayment.
CONC 5A.5.3 R is a residual provision that applies to a firm established in the UK which carries on debt administration or debt collection, but where the rules in CONC 5A do not apply to a lender because the lender is established outside the UK and provides electronic commerce activities into the UK. Where a borrower gives notice to the lender referred to in CONC 5A.5.3 R, only charges which exceed the amounts set out in CONC 5A.2 or CONC 5A.3 are void. The borrower remains under a contractual obligation to repay the credit received under the agreement and any charges under the agreement permitted by those provisions.