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CONC 1.1 Application and purpose

Application

CONC 1.1.1 G
  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.

Purpose

CONC 1.1.2 G

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.

CONC 1.1.3 G

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: a reminder

CONC 1.1.4 G

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).

CONC 1.2 Who? What? Where?

CONC 1.2.1 R

Subject to CONC 1.2.8R and MCOB 14.1.5R, 2CONC applies to a firm with respect to carrying on credit-related regulated activities and connected activities, unless otherwise stated in, or in relation to, a rule.1

CONC 1.2.2 R

A firm must:

  1. (1)

    ensure that its employees and agents comply with CONC; and

  2. (2)

    take reasonable steps to ensure that other persons acting on its behalf comply with CONC.

Guidance on appointed representatives

CONC 1.2.3 G
  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.

Where?

CONC 1.2.5 R

CONC, except in relation to CONC 3, applies with respect to activities carried on by a firm:

  1. (1)

    with a customer whose habitual residence is in the UK from an establishment maintained by the firm (or its appointed representative) in the UK; or

  2. (2)

    with a customer whose habitual residence is in the UK from an establishment of the firm (or its appointed representative) outside the UK.

EEA territorial scope rule: compatibility with European law

CONC 1.2.6 R
  1. (1)

    CONC does not apply to an incoming ECA provider where, in providing a service, the provider is acting as such.

  2. (2)

    CONC applies to an outgoing ECA provider where, in providing a service, the provider is acting as such.

  3. (3)

    The territorial scope of CONC is otherwise modified to the extent necessary to be compatible with European law.

  4. (4)

    This rule overrides every other rule in this sourcebook.

Note: article 3(3) of, and the Annex to, the E-Commerce Directive

2Agreements secured on land

CONC 1.2.7 G
  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.

2Application to MCD article 3(1)(b) creditors and MCD article 3(1)(b) credit intermediaries

CONC 1.2.8 R

2Subject to CONC 1.2.10R:

  1. (1)

    the following provisions of CONC apply to an MCD article 3(1)(b) creditor and to an MCD article 3(1)(b) credit intermediary:

    1. (a)

      CONC 1.2 and CONC 1.3 (application and purpose and guidance on financial difficulties);

    2. (b)

      CONC 2.2 (general principles for credit-related regulated activities);

    3. (c)

      CONC 2.7 (distance marketing);

    4. (d)

      CONC 2.8 (e-commerce); and

    5. (e)

      CONC 2.9 (prohibition of unsolicited credit tokens);

  2. (2)

    the following provisions of CONC additionally apply to an MCD article 3(1)(b) creditor:

    1. (a)

      CONC 2.4 (credit references: conduct of business: lenders and owners);

    2. (b)

      CONC 2.10 (mental capacity guidance);

    3. (c)

      CONC 4.6 (pre-contract disclosure: continuous payment authorities);

    4. (d)

      CONC 6.4 (appropriation of payments);

    5. (e)

      CONC 6.5 (assignment of rights); and

    6. (f)

      CONC 6.7 (post contract: business practices); and

  3. (3)

    the following provisions of CONC additionally apply to an MCD article 3(1)(b) credit intermediary (unless it is also acting as an MCD article 3(1)(b) creditor and carrying out a direct sale of the proposed article 3(1)(b) credit agreement)3:

    1. (a)

      CONC 2.5 (conduct of business: credit broking);

    2. (b)

      CONC 4.4.2R(4) (pre-contractual requirements: credit brokers);

    3. (c)

      CONC 5.4 (conduct of business: credit brokers), and the reference in that rule to credit broking includes a reference to advising on regulated credit agreements for the acquisition of land; and

    4. (d)

      CONC 6.8 (post contract business practices: credit brokers).

CONC 1.2.9 G
CONC 1.2.10 R
  1. (1)

    2CONC 1.2.8R and the rules applied by CONC 1.2.8R do not apply to an MCD article 3(1)(b) creditor or MCD article 3(1)(b) credit intermediary where the MCD article 3(1)(b) credit agreement would be an exempt agreement pursuant to article 60H(1) of the Regulated Activities Order but for:

    1. (a)

      paragraph (1)(b)(ii)(bb) of article 60H of the Regulated Activities Order (which relates to high net worth borrowers); or

    2. (b)

      article 60HA of the Regulated Activities Order (exemptions not permitted under the MCD).

  2. (2)

    Agreements of the kind referred to in paragraph (1)(a) are excluded from CONC 1.2.8R and the rules applied by CONC 1.2.8R only if the rules in CONC App 1.4.1R to CONC App 1.4.4R, and the rules to which those rules refer, are complied with.

[Note: article 60H(2) of the Regulated Activities Order]

CONC 1.2.11 G

2The purpose of CONC 1.2.10R(1)(a) is to enable a high net worth borrower under an MCD article 3(1)(b) credit agreement to waive the protections and remedies applicable to regulated credit agreements, except for those that transpose or implement the MCD. The MCD does not contain an exemption or derogation in respect of borrowing above a certain amount, unlike the Consumer Credit Directive: the EUR75,000 threshold in that Directive has been implemented in the form of the exemption for high net worth borrowers in article 60H of the Regulated Activities Order.

CONC 1.3 Guidance on financial difficulties

CONC 1.3.1 G

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.