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    HMT Consults on Reform of Consumer Credit Act, Issues Other Updates

    January 11, 2023

    The HM Treasury (HMT) is seeking comments, until March 17, 2023, on reforming the Consumer Credit Act 1974 or CCA. It also published a policy paper on the terms of reference for the review of pro-innovation regulation of emerging technologies and extended the Mortgage Guarantee Scheme by a year, to the end of December 2023, helping people with 5% deposits on to the property ladder. Additionally, the Financial Conduct Authority (FCA) published data and valuable insights on the UK fintech industry under the Innovation Hub, imposed a fine of GBP 4,023,600 on Al Rayan Bank PLC (Al Rayan) for anti-money laundering failures, and revoked temporary permissions of Lyonnaise de Banque for failing to apply for authorization in a timely manner. The firm can no longer conduct regulated activity in the UK.

    The consultation on reforming the Consumer Credit Act will modernize and simplify consumer credit and consumer hire regulation, facilitating innovation in products and the arrival of new entrants into the market. The Consumer Credit Act 1974 governs the regulation surrounding billions of credit card purchases, personal loans, and consumer hire agreements made by UK consumers every year. The overall objective for this reform is to modernize and streamline regulation to the benefit of consumers and business, thus creating a simpler, more focused regulatory regime for consumer credit and modernizing consumer credit regulation so that it follows more closely the approaches in other areas of financial services regulation. The government expects that the reform will result in increased access to new and innovative credit products for consumers and cost savings for UK firms. The reform will also aim to increase equality and fairness in the credit market, by improving accessibility and access to credit products for a range of consumers, including those with mental health concerns and low levels of financial literacy to make the consumer journey as inclusive as possible. The government seeks views on how the consumer credit regulatory environment could be changed to ensure optimal performance of regulation surrounding customer communications, consumer protection, and sanctions for firms that do not adhere to regulatory standards and on how this reform should approach the accessibility of credit and financial inclusion.

    The policy paper on terms of reference for prov-innovation regulation sets out scope of the review of how the UK can better regulate emerging technologies. The pro-innovation regulation ensures accelerating safe and ethical development, testing, route to market, and uptake of new technology products. The government has tasked Sir Patrick Vallance, who is the Government Chief Scientific Adviser (GCSA) and National Technology Adviser (NTA), to lead the work with industry experts and advise how pro-innovation regulation can be applied in key growth sectors in such a way that UK can realize the economic and social benefits of new technologies as soon as possible. The project will identify opportunities and enablers for pro-innovation regulation of science and technology sectors with high potential to attract investment and enable growth of UK-based businesses and the economy. Sir Patrick will review growth sectors that include digital technology, life sciences and green industries, followed by advanced manufacturing and creative industries.

    The FCA Innovation Hub published data on the fintech industry. The data provides deeper understanding of how new technology is being used, informs about policy, and helps understand the barriers to access faced by new business models. Over time, FCA has supported a diverse range of firms, from incumbents to fintech start-ups, allowing firms to test innovative products or services in a live market through the Regulatory Sandbox or helping firms resolve regulatory questions through Innovation Pathways. The data show that, until the end of 2022, 168 firms and products were accepted for testing in the Regulatory Sandbox. The findings reveal that retail banking and payments as well as investment and retail lending sectors account for the biggest number of innovators. In terms of technology and areas of innovation, recent use cases in Regulatory Sandbox include open banking, digital ID, blockchain and distributed ledger technology. While the common innovations supported within innovation pathways include open banking use cases in Robo-advice and data infrastructure areas, blockchain use cases within the payment and wholesale markets sectors, and process innovation, Insurtech, and embedded finance propositions.


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    Keywords: Europe, UK, Banking, Securities, Consumer Credit Act, Credit Risk, Lending, Regulatory Reforms, Regtech, Innovation Hub, Regulatory Sandbox, Open Banking, Blockchain, Distributed Ledger Technology, Mortgage Lending, Mortgage Guarantee Scheme, Fintech, Al Rayan Bank, Lyonnaise De Banque, FCA, HM Treasury

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