The Government is committed to facilitating sustainable financial services that give consumers greater choice in accessing credit. To help achieve this aim, the Government has fundamentally reformed regulation of the consumer credit market, transferring regulatory responsibility from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) on 1 April 2014. The FCA has transposed key elements of the OFT’s Irresponsible Lending Guidance into binding rules. The FCA makes clear that a firm should lend responsibly, and takes reasonable steps to assess the customer’s ability to meet repayments in a sustainable manner without undue difficulties, and without having to borrow further. Ultimately, money should only be lent to a consumer if they can afford to repay it.
Furthermore, the Government has already introduced several initiatives to support the credit union sector. These include investing £38m in the sector through the Department of Work and Pensions’ Credit Union Expansion Project, and providing £500,000 to help armed forces personnel access credit union services.
The scheme referred to at paragraph 3.45 of the Autumn Statement 2016 is undertaken by the England Illegal Money Lending Team. The Team recovers funds from convicted loan sharks under the Proceeds of Crime Act (POCA) and currently uses this to fund community education work and a credit union incentive scheme in areas which are vulnerable to loan sharks. The scheme provides cash incentives for new credit union accounts into which consumers make regular savings.
In 2018, governance of the Team, and control of how it uses funds recovered under POCA, will transfer to HM Treasury. In April 2017, the Financial Conduct Authority will introduce a new levy collected from consumer credit firms which will fund the Team’s enforcement and education work. This will make it possible to free-up POCA funds currently used for education about loan sharks to expand the credit union scheme.