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Our ref:  FOI3832

 

 

Dear Mr Wingate

 

We refer to your request under the Freedom of Information Act 2000 (the
Act), for the following information:

 

“We understand that the FCA has a definition of the term "High Cost Short
Term Credit" which is more commonly referred to in public as a payday
loan.

 

We are aware of the FCA's definition 1.20 of the FCA's consultation paper
of July 14th.

 

What we would like to know is where the FCA's definition comes from. For
example, is this definition one that comes from Parliament, The Treasury
or is it one invented solely by the FCA?

 

This is important because it defines what products fall within the payday
cap and which do not and who it is that decides that.

 

If it is the FCA that decides the definition of this product.  Can you
explain under what specific regulatory powers the FCA has to set these
definitions.”

 

Your request has now been considered.

 

In line with our policy and guidance produced by the Ministry of Justice,
your request for information has not been dealt with under the formal FoIA
regime.  This is because your request is asking for an explanation about
the origin of a definition used in our rules, rather than a request for
information that we hold.  We have therefore treated your email of 27
December 2014 as "routine correspondence".  Please see page 6 of the
attached link for further information:

[1]https://www.ico.gov.uk/tools_and_resourc...

The expression “High-Cost Short-Term Credit” was originally used by the
FCA in CP13/10 when the FCA proposed introducing a number of rules
specific to high-cost short-term credit.

 

In CP13/10 we explained that the common term for these products is ‘pay
day loans’ but that our definition tried to capture the fundamental
business model and to future proof the definition.  In our Policy
Statement (PS) 14/3 we summarised the responses to the consultation and
set out our response which stated that we would consider whether the
definition needs to be amended in light of our work on the price cap.  The
definition “high-cost short-term credit” was made as a rule in the FCA
Glossary in the Consumer Credit (Consequential and Supplementary
Amendments) Instrument 2014 (Annex A page 9).  The powers we used to make
those rules are set out on page 1 of that instrument.

 

The duty under which we have made the price cap rules requires us to make
rules concerning “one or more specified descriptions of regulated credit
agreement appearing to the FCA to involved the provision of high-cost
short-term credit,” (our emphasis).  The duty to set out the detail of the
definition of HCSTC was given to us by Parliament.

 

As we said in CP14/10 the legislation does not define ‘high-cost
short-term credit’ and we chose to use the definition in our current
rules, which we were consulting on at the time that the legislation was
passed.  The CP explains that we did consider changing the definition of
‘short-term’ to cover a longer period, and we considered whether to
include other forms of high-cost credit excluded from the current
definition (home collected credit, pawn broking, log book loans and
overdrafts, as well as open-ended running account credit which is not
substantially repayable in 12 months).  However, we decided not to do so
for the reasons set out in CP14/10 and PS14/16.

 

Yours sincerely

 

 

Information Access Team

Financial Conduct Authority

 

 

 

This communication and any attachments contain information which is
confidential and may be subject to legal privilege. It is for intended
recipients only. If you are not the intended recipient you must not copy,
distribute, publish, rely on or otherwise use it without our consent. Some
of our communications may contain confidential information which it could
be a criminal offence for you to disclose or use without authority. If you
have received this email in error please notify [email address]
immediately and delete the email from your computer.

The FCA (or, if this email originates from the PSR, the FCA on behalf of
the PSR/the PSR) reserves the right to monitor all email communications
for compliance with legal, regulatory and professional standards.

This email is not intended to nor should it be taken to create any legal
relations or contractual relationships. This email has originated from the
Financial Conduct Authority (FCA), or the Payment Systems Regulator (PSR).

The Financial Conduct Authority (FCA) is registered as a limited company
in England and Wales No. 1920623. Registered office: 25 The North
Colonnade, Canary Wharf, London E14 5HS, United Kingdom

The Payment Systems Regulator (PSR) is registered as a limited company in
England and Wales No. 8970864. Registered office: 25 The North Colonnade,
Canary Wharf, London E14 5HS, United Kingdom

Switchboard 020 7066 1000

Web Site http://www.fca.org.uk (FCA); http://www.psr.org.uk (PSR)

 

References

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1. https://www.ico.gov.uk/tools_and_resourc...