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CeMAP Unit 2 > Topic 22 Consumer Credit > Flashcards

Topic 22 Consumer Credit Flashcards

1
Q

Which act covers the regulation of the following certain loans to individuals, small partnerships & incorporated bodies (not companies)?

A

Consumer Credit Act 2006

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2
Q

In April 2014 what happened to the regulatory powers for consumer?

A

These were transferred to the FCA

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3
Q

Where are the rules regarding the regulation of firms kept?

A

Consumer Credit Sourcebook (CONC)

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4
Q

The below are what in relation to the Consumer Credit Act (CONC)?

  • Generally no limit to the amount of loan covered by the act
  • Loans over £25K to small businesses for business purposes are exempt from regulations
  • High net worth client can be exempt from act at their own request
A

Main provisions of the act

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5
Q

The below are what in relation to the Consumer Credit Act (CONC)?

  • Borrowers protected by the act must include an ordinary or a partnership with 3 or fewer members
  • Complaints through the act can be taken to FOS
  • Provisions to increase fair treatment of borrowers
  • Borrow must be given copy of credit agreement in writing
A

Main provisions of the act

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6
Q

The below are what in relation to the Consumer Credit Act (CONC)?

  • Borrows have a 14 day cooling off period
  • Lender must send the cooling off notice with a copy of the agreement
  • Annual Percentage Rate (APR) must be calculated using a set formula (Cost of setting up the loan)
A

Main provisions of the act

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7
Q

True or False

The below do not benefit from the right to cancel using the cooling off period

  • Bank overdrafts
  • Small loans of £50 or less (unless hire purchase or conditional sales agreement)
  • Small loans of £35 or less completed away from lenders premises
  • Loans to pay death duties
A

True

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8
Q

What is the purpose for Annual Percentage Rate (APR)?

A

System for comparing the price of lending between providers

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9
Q

What does Annual Percentage Rate (APR) consist of ?

A
  1. Interest Rate
  2. Additional Costs (setting up the loan)
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10
Q

What is Annual Percentage Rate of Charge (APRC)?

A

Annual Percentage Rate (APR) that applies to first & second charge mortgage lending

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11
Q

The below are all what in relation to consumer credit?

  • Representative example must be included as part of any advertisement that show a figure relating to the cost of credit. Example must include Representative APR
  • Creditors must assess a borrower’s creditworthiness before granting credit
  • Adequate explanations must be included in respect of a proposed credit agreement
A

Changes to Consumer Credit Acts (CCA) brought about by EU Credit Directive

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12
Q

The below are all what in relation to consumer credit?

  • Certain information must be provided to a Borrower before they enter into a credit agreement
  • Borrower has 14 day Cooling Off period
  • Borrower must be notified in writing before the conclusion of the agreement
  • Borrower is able to seek financial redress from creditor in circumstances if they are unable to obtain satisfaction from supplier of goods or services
A

Changes to Consumer Credit Acts (CCA) brought about by EU Credit Directive

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13
Q

In what circumstances could a customer seek redress from a creditor if they are unable to obtain satisfaction from a supplier of goods & services?

A
  1. Where Consumer Credit Acts (CCA) would not normally provide for such redress
  2. Where value of goods & services exceeds £30K & credit is not more than £60,260
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14
Q

To end an open-ended agreement how much notice does a borrower need to give?

A

1 Month

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15
Q

To end an open-ended agreement how much notice does a creditor need to give?

A

2 months and a justified reason for termination

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16
Q

The below are all what in relation to consumer credit?

  • The borrower must be informed of the debt is to be sold to a third party
  • Creditors must disclose the extent with which they are working with one or more creditors
A

Changes to Consumer Credit Acts (CCA) brought about by EU Credit Directive

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17
Q

Where an application for credit is declined based on information from a credit agency what must the creditor provide?

A

Notify the borrower & provide contact details of the credit reference agency

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18
Q

The 2nd EU Consumer Credit Directive has now come into effect offer better protection for anyone applying for credit but does it apply to the UK?

A

No as it began in October 2023

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19
Q

What is Representative APR?

A

APR that a lender must offer to 51% of successful applicants of a credit product

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20
Q

What does a Credit Intermediary do?

A
  • Helps an individual obtain credit by helping them complete a loan application
  • Find a lender with the lowest rate
  • Willing to lend to those with poor credit history
21
Q

The below are what in relation to the FCA’S Consumer Credit Regulation

  • Consumer Credit firms must be regulated by the FCA
  • The FCA maintains a registered of firms that have been granted a consumer credit licence
  • FCA conduct rules apply
A

Examples of the more rigours provision by the FCA in relation to Consumer Credit Regulation

22
Q

The below are what in relation to the FCA’S Consumer Credit Regulation

  • FCA expects firms that offer consumer credit to comply with customers duty & demonstrate fair treatment to customers
  • FCA has large supervisor powers & uses senior managers & certificate Regime to monitor individuals performing roles that require FCA approval or certification
  • FCA has larger powers in regards investigation, enforcement & redress
A

Examples of the more rigours provision by the FCA in relation to Consumer Credit Regulation

23
Q

What is payday lending?

A

Very short term borrowing to cover shortfalls in funds from one payday to the next

24
Q

The measures introduced by the FCA on short term borrowing are?

A

Cap on:

  • Interest & fees charged must not exceed 0.8% per day of amount borrowed
  • Default fees cannot exceed £15
  • Borrows must never be exceed 100% of amount borrowed by fees & charges
25
Q

All the below are what in relation to consumer credit?

  • Credit Broking
  • Debt Administration
  • Debt Collecting
A

Require full permission from the FCA

26
Q

All the below are what in relation to consumer credit?

  • Debt Counselling
  • Debt Adjusting
  • Lending that is not limited permission
A

Require full permission from the FCA

27
Q

All the below are what in relation to consumer credit?

  • Credit Information Services
  • Credit reference agency services
  • P2P Lending
A

Require full permission from the FCA

28
Q

What activities does the FCA’S “Limited Permission” cover

A

Lower risk activities

29
Q

Who are the FCA’S “Limited Permission” for lower risk activities aimed at?

A

Business outside financial services

30
Q

Which Consumer Credit Sourcebook (CONC) section is this?

  • Explains the purpose of CONC
  • Section on guidance that a customer is in financial difficulty
A

CONC 1: Application & Purpose & Guidance of financial difficulties

31
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Credit related activities all providers are expected to treat customers fairly and not mislead them

A

CONC 2: Conduct of business standards - General

32
Q

According to CONC 2: Conduct of business standards - General all the below are examples of what?

  • Targeting customers with offers of credit that are not suitable for them
  • High pressure selling, aggressive or oppressive behaviour
  • Not allowing sufficient & reasonable time to make repayments
  • Taking steps to repossess a customs home other than a last resort
A

Examples of activities that contravene CONC 2: Conduct of business standards - General

33
Q

Which Consumer Credit Sourcebook (CONC) section is this?

  • Details what is considered to be communication with a customer in relation a credit agreement
A

CONC 3: Financial promotions & communications with customers

34
Q

In relation to CONC 3: Financial promotions & communications with customers what message should high cost short term credit carry?

A

A warning stating that late payment can cause serious money problems

35
Q

Which Consumer Credit Sourcebook (CONC) section is this?

  • Deals with quotations for credit & consequences of not repaying a mortgage or a loan.
  • Details the information a lender must provide about interest rates, charges & costs
A

CONC 4: Pre-contractual Requirements

36
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Details what a provider must do before making credit available to ensure customers can afford their borrowing

A

CONC 5: Responsible Lending

37
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Details the maximum charges for high cost, short term borrowing

A

CONC 5A: Cost Cap for high-cost, short term credit

38
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Imposes a total credit cap of 100% on rent to own agreements meaning firm cannot change more than the cost of the product

A

CONC 5B: Cap cost for rent-to-own agreements

39
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Firms are require to implement & maintain charging structures that are simple, transparent & capable of easy comparison

A

CONC 5C: Overdraft Pricing

40
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Firms must monitor customers patterns of overdraft use, identify patterns of repeated use and take appropriate steps with the aim of changing such patterns of use

A

CONC 5D: Overdraft repeated use

41
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Checks a customer must undertake if they significantly increase lending to a customer under a regulated agreement

A

CONC 6: Post-contractual Requirements

42
Q

Which Consumer Credit Sourcebook (CONC) section is this?

  • Providers must have policies & procedures who fall into arrears firms must treat customers fairly
  • Covers debt collection & debt administration activities
A

CONC 7: Arrears, default & recovery (including repossession)

43
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Debt Advice that can be undertaken by third-party debt counsellors & other organisations

A

CONC 8: Debt Advice

44
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Rules for Debt Management firms (that manage repayments to creditors on behalf of an individual) & small not for profit debt advice bodies that relevent financial & management resources are in place

A

CONC 10: Prudential rules for Debt Management Firms

45
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Covers the cancellation rights of peer to peer lending and providers who make services available over the internet

A

CONC 11: Cancellation

46
Q

Which Consumer Credit Sourcebook (CONC) section is this?

Deals with some of the less common arrears of consumer credit.

A

CONC 12-15 & Appendix 1

47
Q

Where can the relating to total charges for credit and how it’s calculated be found?

A

Appendix 1

48
Q

True or False

CONC 7: Arrears, default & recovery (including repossession) did not use to be regulated

A

True

CeMAP Unit 2 (11 decks)

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