Further to our recent briefing (see here) the Government has now published the new content requirements for Default Notices served on borrowers that breach Consumer Credit Act 1974 (CCA) regulated loan agreements.
The Consumer Credit (Enforcement, Default and Termination Notices) (Coronavirus) (Amendment) Regulations 2020 come into force on 2 December 2020 and make significant changes to the prescribed forms of wording that must be included in Default Notices.
Following research that showed the use of capitalised text and legal terms can make the information harder for borrowers in debt to understand, the new regulations seek to take a softer, more consumer friendly, approach.
Currently, Default Notices must include a number of "prominent" forms of wording - and this prominence is generally achieved through the capitalisation of some fairly intimidating statements such as "IF YOU DO NOT TAKE THE ACTION REQUIRED BY THIS NOTICE BEFORE THE DATE SHOWN THEN THE FURTHER ACTION SET OUT BELOW MAY BE TAKEN AGAINST YOU." While this wording must still be included in the notice, it must now feature in lowercase text and with the underlined sections in bold. Elsewhere, the new regulations require the inclusion of specific definitions of jargon, such as "surety" to ensure that consumers understand the information that is being provided to them. Other changes relate to the signposting of debt advice, such as the Government's Money Advice Service, and the Financial Conduct Authority's (FCA) information sheet
Lenders are advised to review and update their templates to ensure that they comply with the new requirements. The new regulations give a six month grace period beginning on 2 December 2020 (and therefore ending on 2 June 2021) in which previously compliant Default Notices may still be used.
For help reviewing and updating your templates, or complying with any other CCA or FCA obligations, please contact one of our Consumer Credit specialists.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.