1. (1)

   1The Consumer Credit sourcebook (CONC) is the specialist sourcebook for credit-related regulated activities.

2. (2)

   CONC applies as described in this chapter, unless the application of a chapter, section or a rule is described differently in the chapters, sections or rules in CONC.

The purpose of CONC is to set out the detailed obligations that are specific to credit-related regulated activities and activities connected to those activities carried on by firms. These build on and add to the high-level obligations, for example, in PRIN, GEN and SYSC, and the requirements in or under the CCA.

Firms are reminded that other parts of the FCA Handbook and PRA Handbook also apply to credit-related regulated activities. For example, the arrangements for supervising firms, including applicable reporting obligations, are described in the Supervision manual (SUP) and the detailed requirements for handling complaints are set out in the Dispute Resolution: Complaints sourcebook (DISP). The Client Assets sourcebook (CASS) also contains rules about client money that apply in certain circumstances.

The Principles for Businesses (PRIN) apply as a whole to firms with respect to credit-related regulated activities and ancillary activities in relation to credit-related regulated activities (see PRIN 3). In carrying on their activities, firms should pay particular attention to their obligations under:

1. (1)

   Principle 1 (a firm must conduct its business with integrity);

2. (2)

   Principle 2 (a firm must conduct its business with due skill, care and diligence);

3. (3)

   Principle 3 (a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems);

4. (4)

   Principle 6 (a firm must pay due regard to the interests of its customers and treat them fairly);

5. (5)

   Principle 7 (a firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading);

6. (6)

   Principle 9 (a firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment);

7. (7)

   Principle 10 (a firm must arrange adequate protection for clients' assets when it is responsible for them); and

8. (8)

   Principle 11 (a firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice).

1. (1)

   Although CONC does not apply directly to a firm'sappointed representatives, a firm will always be responsible for the acts and omissions of its appointed representatives in carrying on business for which the firm has accepted responsibility (section 39(3) of the Act). In determining whether a firm has complied with any provision of CONC, anything done or omitted by a firm'sappointed representative (when acting as such) will be treated as having been done or omitted by the firm (section 39(4) of the Act).

2. (2)

   Firms should refer to SUP 12 (Appointed representatives), which sets out requirements which apply to firms using appointed representatives.

The credit-related regulated activities comprise consumer credit lending, credit broking, debt counselling, debt adjusting, debt administration, debt collecting, providing credit information services, providing credit references, operating an electronic system in relation to lending (but, other than in FEES and SUP, only insofar as it relates to a borrower or prospective borrower under a P2P agreement)1 and consumer hiring.

1. (1)

   2CONC does not apply to credit agreements secured on land, with some limited exceptions as set out in (3) and (4), below.

2. (2)

   Agreements secured by a second or subsequent charge on the customer’s home are, where regulated, governed by MCOB from 21 March 2016 (subject to transitional provisions allowing for the earlier adoption of MCOB). For detailed guidance on the regulation of secured lending, see PERG 4.

3. (3)

   The agreements secured on land to which CONC may apply include the following agreements (unless the agreement in question, or activity in relation to it, is otherwise exempt or excluded):

   1. (a)

      an agreement under which the borrower is a relevant recipient of credit (within the meaning of article 60L of the Regulated Activities Order) but is not one or more individuals or trustees; for example, a partnership comprising two or three partners, one but not all of the partners in which is a body corporate; and

   2. (b)

      an MCD article 3(1)(b) credit agreement secured on land, less than 40% of which is used as or in connection with a dwelling (whether by the borrower or anyone else) to the extent specified in CONC 1.2.8R.

4. (4)

   Broking in relation to the above agreements may be credit broking under article 36A of the Regulated Activities Order, whether the agreement is regulated or exempt. There are also some other secured credit agreements which are exempt, but the broking of which may still constitute credit broking, because some exemptions are disregarded by article 36A of the Regulated Activities Order. One example is a loan of more than £25,000 entered into wholly or predominantly for the purposes of a borrower’s business and secured by a second or subsequent charge on the borrower’s home: such a loan is not a regulated mortgage contract because it is a second charge business loan (as defined by article 61A of the Regulated Activities Order), and is an exempt agreement by virtue of article 60C(3) of the Regulated Activities Order; article 36A(4)(a) of the Regulated Activities Order disregards that exemption.

2 MCD article 3(1)(b) creditors and MCD article 3(1)(b) credit intermediaries are also subject to rules in MCOB, in accordance with MCOB 14.1.3R to MCOB 14.1.5R.

7The regulatory status of article 3(1)(b) credit agreements entered into with high net worth individuals is dependent on several factors due to the different treatment of these agreements over time.

1. (1)

   An article 3(1)(b) credit agreement is exempt under article 60H of the Regulated Activities Order:

   1. (a)

      if at the time it was entered into, the conditions set out in article 60H(1) were met; and

   2. (b)

      if entered into on or after 21 March 2016 (whether before or after 21 July 2022), it was outside the scope of the MCD as implemented in the United Kingdom (such agreements are currently set out in section 423A(3) of the Act and article 60HA(2) of the Regulated Activities Order).

2. (2)

   Where an article 3(1)(b) credit agreement not falling within paragraph (1)(b) is entered into on or after 21 July 2022:

   1. (a)

      if the borrower is UK resident or treated as present in the United Kingdom when the agreement is entered into (see PERG 2.7.19J), the agreement is an exempt agreement where the conditions in article 60H(1) of the Regulated Activities Order are met.

   2. (b)

      if the borrower is not UK resident or treated as present in the United Kingdom when the agreement is entered into, the agreement will not be an exempt agreement under article 60H. The borrower can, however, elect to waive the protections and remedies applicable to regulated credit agreements except for those that transposed or implemented the MCD as it applied to the United Kingdom before IP completion day. This will mean the agreement will not be subject to CONC but some rules in MCOB will still apply (see CONC 1.2.9G).

3. (3)

   An article 3(1)(b) credit agreement not falling within paragraph (1) entered into on or after 21 March 2016 and before 21 July 2022 cannot be an exempt agreement under article 60H, but the borrower could elect to waive the protections and remedies applicable to regulated credit agreements except those that transposed or implemented the MCD. This will mean the agreement will not be subject to CONC but some rules in MCOB will still apply (see CONC 1.2.9G).

4. (4)

   The ability of a borrower to waive the protections and remedies applicable to regulated credit agreements – except those that transposed or implemented the MCD – is set out in CONC 1.2.10R (as it applied when the agreement was entered into).

5 MCOB 1.2.22R(1) provides that a rule in MCOB that applies to a mortgage lender, a home purchase plan provider, a reversion provider6 or a SRB agreement provider also applies to a P2P platform operator facilitating a regulated mortgage contract, home purchase plan, home reversion plan or regulated sale and rent back agreement where the lender, plan provider, reversion provider or agreement provider does not require permission to enter into the transaction. It applies subject to the provisions in MCOB 15.

In CONC (unless otherwise stated in or in relation to a rule), the following matters, among others, of which a firm is aware or ought reasonably to be aware, may indicate that a customer is in financial difficulties:

1. (1)

   consecutively failing to meet minimum repayments in relation to a credit card or store card;

2. (2)

   adverse accurate entries on a credit file, which are not in dispute;

3. (3)

   outstanding county court judgments for non-payment of debt;

4. (4)

   inability to meet repayments out of disposable income or at all, for example, where there is evidence of non-payment of essential bills (such as, utility bills), the customer having to borrow further to repay existing debts, or the customer only being able to meet repayments of debts by the disposal of assets or security;

5. (5)

   consecutively failing to meet repayments when due;

6. (6)

   agreement to a debt management plan or other debt solution;

7. (7)

   evidence of discussions with a firm (including a not-for-profit debt advice body) with a view to entering into a debt management plan or other debt solution or to seeking debt counselling.