CONC 6.7 Post contract: business practices

1. (1)

   This section applies to a firm with respect to consumer credit lending.

2. (2)

   CONC 6.7.17 R to CONC 6.7.26 R also apply to a firm with respect to operating an electronic system in relation to lending in relation to a borrower under a P2P agreement and references in those provisions to a firm refinancing an agreement refer to any action taken by an operator of an electronic system in relation to lending which has the result that a P2P agreement is refinanced.

A firm must monitor a customer's repayment record and take appropriate action where there are signs of actual or possible repayment difficulties.

[Note: paragraph 6.2 of ILG]

A firm must first allocate a repayment to the debt subject to the highest rate of interest (and then to the next highest rate of interest and so on)1 for:

1. (1)

   the outstanding balance on a credit card; or

2. (2)

   the outstanding balance on a store card; or

3. (3)

   a credit card or a store card, in relation to which there is a fixed-sum credit element, to repayments beyond those required to satisfy the fixed instalments.

1. (1)

   A firm must set the minimum required repayment under a regulated credit agreement for a credit card or a store card at an amount equal to at least that amount which repays the interest, fees and charges that have been applied to the customer's account, plus one percentage of the amount outstanding.

   [Note: paragraph 6.4 of ILG]

2. (2)

   Where (1) applies and a firm applies interest to a period of more than one month, for the purpose of calculating the amount of the interest part of the minimum required repayment the firm may disregard any interest applied in respect of a period prior to the period of the statement in question.

   [Note: paragraph 6.4 (box) of ILG]

3. (3)

   Paragraph (1) applies to agreements made on or after 1 April 2011.

A firm under a regulated credit agreement for a credit card or a store card must provide a customer with the option to pay any amount they choose (equal to or more than the minimum required repayment but less than the full outstanding balance) on a regular basis, when making automated repayments.

[Note: paragraph 6.5 of ILG]

A firm must not increase, nor offer to increase, the customer's credit limit on a credit card or store card where:

1. (1)

   the firm has been advised that the customer does not wish to have any credit limit increases; or

2. (2)

   a customer is at risk of financial difficulties.

   [Note: paragraphs 6.6 and 6.7 of ILG]

A firm under a regulated credit agreement for a credit card or a store card must:

1. (1)

   permit a customer at any time to reduce or decline offers to increase the credit limit; and

2. (2)

   permit a customer to decline to receive offers of credit limit increases.

   [Note: paragraphs 6.8 and 6.9 of ILG]

A firm under a regulated credit agreement for a credit card or store card must notify the customer of a proposed increase in the credit limit under the agreement at least 30 days before the increase comes into effect, except where: 1

[Note: paragraph 6.17 of ILG]

1. (1)

   the increase is at the express request of the customer: or1

   1
2. (2)

   the increase is proposed by the firm, but the customer agrees to it at that time and wishes it to come into effect in less than 30 days.1

   1

Where a customer is at risk of financial difficulties, a firm under a regulated credit agreement for a credit card or a store card must, other than where a promotional rate of interest ends, not increase the rate of interest under the agreement.

[Note: paragraph 6.10 of ILG]

1. (1)

   A firm under a regulated credit agreement for a credit card or store card must notify a customer at least 30 days before an increase in the rate of interest under the agreement comes into effect.

   [Note: paragraph 6.18) of ILG]

2. (2)

   Paragraph (1) does not apply in the following cases where in relation to an agreement:

   1. (a)

      the interest rate is set to directly track the movement in an external index (such as a base rate), which was adequately explained under CONC 4.2.15 R and was clearly stated in the agreement; or

   2. (b)

      the period of a promotional interest rate has come to an end.

Where a firm proposes to exercise a power under a regulated credit agreement for a credit card or store card to increase the interest rate, the firm must:

1. (1)

   permit the customer sixty days, from the date of the firm's notice of the proposed increase during which period the customer may give notice to the firm requiring it to close the account;

2. (2)

   permit the customer to pay off the outstanding balance at the rate of interest before the proposed increase and over a reasonable period; and

3. (3)

   give notice to the customer of the rights in (1) and (2).

   [Note: paragraphs 6.11 and 6.19 of ILG]

Where a firm has a right to increase the interest rate under a regulated credit agreement, the firm must not increase the interest rate unless there is a valid reason for doing so.

[Note: paragraph 6.20 of ILG]

Where a firm increases a rate of interest based on a change in the risk presented by the customer, the firm must:

1. (1)

   notify the customer that the rate of interest has been increased based on a change in risk presented by the customer; and

2. (2)

   if requested by the customer provide a suitable explanation which may be a generic explanation for such increases.

   [Note: paragraph 6.20 (box) of ILG]

1. (1)

   In CONC 6.7.18 R to CONC 6.7.23 R “refinance” means to extend, or purport to extend, the period over which one or more repayment is to be made by a customer whether by:

   1. (a)

      agreeing with the customer to replace, vary or supplement an existing regulated credit agreement;

   2. (b)

      exercising a contractual power contained in an existing regulated credit agreement; or

   3. (c)

      other means, for example, granting an indulgence or waiver to the customer.

2. (2)

   “Exercise forbearance” means to refinance a regulated credit agreement where the result is that no interest accrues at any time in relation to that agreement or any which replaces, varies or supplements it from the date of the refinancing and either:

   1. (a)

      there is no charge in connection with the refinancing; or

   2. (b)

      the only additional charge is a reasonable estimate of the actual and necessary cost of the additional administration required in connection with the refinancing.

3. (3)

   The term “refinance” within paragraph (1) does not include where under a regulated credit agreement repayable in instalments a customer requests a change in the regular payment date and as a result there is no charge or additional interest in connection with the change.

A firm must not encourage a customer to refinance a regulated credit agreement if the result would be the customer's commitments are not sustainable.

[Note: paragraph 4.27 of ILG]

A firm must not refinance a customer's existing credit with the firm (other than by exercising forbearance), unless:

1. (1)

   the firm does so at the customer's request or with the customer's consent; and

2. (2)

   the firm reasonably believes that it is not against the customer's best interests to do so.

   [Note: paragraph 6.24 of ILG]

Before a firm agrees to refinance high-cost short-term credit, it must:

1. (1)

   give or send an information sheet to the customer; and

2. (2)

   where reasonably practicable to do so, bring the sheet to the attention of the customer before the refinance;

in the form of the arrears information sheet issued by the FCA referred to in section 86A of the CCA with the following modifications:

1. (3)

   for the title and first sentence of the information sheet substitute:

   “High-cost short-term loans

   Failing to repay on time

   Think carefully - rolling over or extending your loan may not be the best option and may make things worse.”; and

2. (4)

   for the bullet points substitute: “

   •Think carefully before borrowing more. Borrowing more money is likely to worsen your situation.

   •Work out how much you owe. To do this, you will need to make a list of all the organisations you owe money to. A debt adviser can help you

   •Put priority debts first. Some debts are more urgent than others because the consequences of not paying them can be more serious than for other debts, for example, mortgage, rent, council tax/ rates, or gas or electricity arrears. A debt adviser can help you to budget to keep your finances under control

   Discuss options with your lender

   •If you are having trouble paying back on time talk to your lender who can suggest ways to repay and make sure it is affordable for you.

   •If you don’t, you may quickly face increased costs from interest or charges. Missed payments could affect your credit rating and make it more difficult to get credit in future.

   Get free help and advice

   •People that access advice resolve their issues more quickly than those that don’t and hundreds of thousands get free debt advice every year.

   •Contact one of these organisations for free debt advice.”

3. (5)

   in relation to an arrears sheet to be used by an operator of an electronic system in relation to lending:

   1. (a)

      for the bullet point headed “Work out how much money you owe” substitute:

      “Work out how much money you owe. To do this, you will need to make a list of all those you owe money to. A debt adviser can help you.”;

   2. (b)

      for the title “ Discuss options with your lender” substitute

      “Discuss options with your peer to peer lending platform (P2P platform)”;

   3. (c)

      for the bullet point which begins “If you are having trouble ?” substitute

      “If you are having trouble paying back on time talk to your P2P platform who can suggest ways to repay and make sure it is affordable for you.”.

      [Note: Until the end of 30 June 2014, transitional provisions apply to CONC 6.7.20 R: see CONC TP 32]

A firm must not refinance high-cost short-term credit (other than by exercising forbearance) on more than two occasions.

[Note: Until the end of 30 June 2014, transitional provisions apply to CONC 6.7.23 R: see CONC TP 3.3]

A firm must not amend the terms of a continuous payment authority without first obtaining the customer's consent, after having fully explained to the customer the reason for the amendment.

[Note: paragraph 3.9miii of DCG]

CONC 6.7.24 R does not preclude the firm from:

1. (1)

   making amendments pursuant to a variation clause to which the customer has previously given consent, after it was fully explained to the customer the reason for the amendment; or

2. (2)

   reducing or waiving payments unilaterally, for example, under a repayment plan, provided that this is explained to the customer.

   [Note: paragraph 3.9miii of DCG]

A firm must use the correct category code and identifier when presenting a payment request to the payment service provider.

[Note: paragraph 3.9miii of DCG]