Legislation and Governing Bodies Affecting the Secured Loans Industry
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Legislation and Governing Bodies in the Secured Loans Industry
Overview
Despite often being labeled as "unregulated," the secured loans market is influenced by various governing bodies and legislation. This article explores the regulations affecting the secured loans industry, focusing on key entities like the Office of Fair Trading (OFT), the Financial Services Authority (FSA), and others. It also examines the impact of significant Parliamentary Acts on this sector.
The Office of Fair Trading (OFT)
The Office of Fair Trading (OFT) plays a crucial role in protecting consumers by enforcing competition and consumer protection laws. It manages Consumer Credit Licenses under the Consumer Credit Act of 1974. Any business promoting or brokering secured loans requires a Category C Consumer Credit License, regardless of the credit amount.
The OFT also enforces amendments to the Act, such as the 'Agreements Amendment,' 'Disclosure of Information,' and 'Early Settlement' updates from 2004. These regulations dictate how secured loans can be advertised and ensure transparency about terms like the Annual Percentage Rate (APR).
Financial Services Authority (FSA)
The Financial Services Authority (FSA), an independent body funded by the organizations it regulates, oversees the Financial Services and Markets Act (FSMA) 2000. In the secured loans sector, the FSA primarily regulates payment protection insurance (PPI). Businesses involved in selling or handling PPI need FSA regulation. The FSA also monitors mortgage regulations and second charge loan advertising.
Finance Industry Standards Institute (FISA)
FISA is a self-regulating body created by the secured loans industry itself. Funded through annual member subscriptions, it publishes guidelines for advertising and enforces compliance within the sector. FISA also offers training courses to support industry standards and legislative compliance.
Information Commissioner's Office (ICO)
The Information Commissioner's Office (ICO) enforces data protection laws. Businesses in the secured loans sector must register as Data Controllers, ensuring they uphold data accuracy, lawful processing, and secure handling.
Other Regulatory Bodies
While not directly controlling the secured loans market, organizations like the Consumer Credit Trade Association (CCTA), Intermediary Mortgage Lenders Association (IMLA), and the Council of Mortgage Lenders (CML) contribute to shaping industry practices. These bodies offer training and lobby the government on credit-related issues.
Conclusion
Despite perceptions of being "unregulated," the secured loans industry is influenced by a web of official and unofficial regulations. As the UK's financial regulation environment evolves, the role of bodies like the FSA is anticipated to grow. Businesses in the secured loans market should be aware of these regulations and the potential costs of compliance.
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