Credit agreements will need to be rewritten, with the aim of giving consumers more information with which to compare products.
For example, they will have to include a new box for consumers to sign if they are buying additional insurance products, such as payment protection plans, on finance. The regulations also set out the information which must be disclosed to a borrower or hirer before signing a regulated agreement. Key financial and related particulars must be separate to the agreement and be given to consumers before they sign.
The Finance and Leasing Association believes documents produced under the new rules are likely to be unwieldy, confusing and inflexible. “The simplifying of credit advertising and the updating of credit agreements were long overdue,” says Ashley Holmes, in the FLA’s legal department. “But the new rules will require a complete rewriting of credit advertisements, and give credit providers just four months to get their new systems in place.”
The system of charges for settling a finance agreement early – the so-called Rule 78 – has been scrapped in favour of a new formula. Lenders can defer the settlement date by a month on request.