The FCA is consulting on changes to CONC to remove several provisions relating to financial promotions, and is also seeking views on the usefulness of the current APR requirements and whether there is a better alternative.
On the proposed changes, the main drive is to remove requirements which are duplicative or outdated, and broadly to rely on Consumer Duty compliance as well as the overarching “fair, clear and not misleading” rules to ensure firms present their consumer credit financial promotions fairly, but enabling them to use greater discretion to present materials in a way that is best for consumer understanding. The FCA found that much of the text it is deleting is either repetitive or else the expectations are clearly enshrined in the Duty, and retaining the more granular detail could hamper firms’ ability to innovate while not actually improving consumer understanding.
The FCA proposes that the changes will take effect 3 months after the rules have been made.
Meanwhile it is more broadly seeking views on cost disclosure, in particular:
- the extent to which disclosure of the Representative APR actually helps consumers understand the total cost of credit and whether there may be a better alternative;
- whether when the mandatory inclusion of a representative example is triggered, this helps customer understanding; and
- whether the 51% threshold for determining Representative APR is still appropriate.
The FCA says research indicates that consumers don’t really understand APRs, but also it thinks that some of the alternatives that have been suggested have their own issues. It seeks views generally, including on:
- whether the current triggers for APRs and representative examples are still right, and, if they were removed would the Consumer Duty suffice to continue to encourage disclosure (some research from Plain Numbers suggested that consumers understood better where there was no APR or Representative example, but the advert focused on the number and amount of each repayment and the total amount of interest and total payable overall);
- whether and when alternative cost disclosures would be more appropriate and increase competition and supply of higher cost credit;
- what would be appropriate alternatives to APR;
- if firms could use alternative cost disclosures, how might this impact on consumer ability to compare products and shop around; and
- if the requirements remain, would it be useful to provide firms with guidance to encourage them into better explanations.
The FCA asks for comments by 17 June.