The Government’s recent announcement that the Office of Fair Trading will cease to be responsible for regulating consumer credit led many to assume tough new regulations for credit broking would be enacted. Instead of the Office of Fair Trading regulating consumer credit, the Financial Conduct Authority will take over the responsibility by 1st April 2014 and is set to introduce a new regulatory framework.

Whilst the change in regulation will primarily affect credit brokers and lenders, it will also impact on businesses which offer credit broking facilities as a secondary service, such as motor trade dealers. The impact on motor trade sales and motor trade insurance is likely to affect the way in which car sales and motor trade insurance is advertised as well as the methodologies insurers and traders use to calculate the cost of credit products. By ensuring credit advertising is subject to the Financial Conduct Authority’s financial promotions regime and that the same set of calculation assumptions are used across the EU, consumers will be able to compare products more easily. This transparency will ensure consumers are free to choose the appropriate product for their needs and that credit sales are easily comparable.

By increasing the powers of the Financial Conduct Authority, the Financial Services Authority believes consumers will benefit from a better equipped body with more flexibility to impose sanctions and regulations on credit providers. The additional scrutiny placed on credit providers, including motor traders and motor trade insurance providers such as Trade Plan Insurance, will ensure safeguards for consumers are in place whilst the extra power given with the Financial Conduct Authority will enable them to provide a range of options for consumers who have lost out due to a company’s actions.

Although the Financial Conduct Authority will have the power to ban firms and individuals from the industry and will be able to impose fines where appropriate, it is widely believed that the introduction of new regimes and regulations will regulate the industry effectively. The new framework of guidelines will ensure businesses which offer consumer credit, such as car dealers, do so according to strict codes of conduct and with increased transparency.

With the Government estimating that four out of five consumers within the UK have an unsecured loan, the new regulatory framework is likely to be welcomed by consumers across the board. By encouraging responsible lending, the Government hopes to ensure that the new regime will deliver the products required by consumers but that these products will be sold and advertised appropriately and according to stringent criteria. Although some people have voiced concern regarding the potential of too much regulation stifling the market, the new approach to consumer credit regulation has been welcomed by many. By ensuring motor trade sales, along with other consumer credit activities, are sold and managed according to a clear framework of regulations, consumer confidence in the market is likely to rise and could, in turn, result in an increase of borrowing and lending thus boosting the market and the economy as a whole.