Explanatory note

This Order provides for certain “buy-now-pay-later” agreements which are currently exempt agreements within article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) (“the Regulated Activities Order”) to become regulated credit agreements within the meaning of article 60B(3) of that Order. These agreements are referred to as “regulated deferred payment credit agreements” in this note. As a result, the regulated activities specified for the purposes of the Financial Services and Markets Act 2000 (c.8) (“FSMA”) by article 60B(1) (entering a regulated credit agreement) and (2) (exercise of lenders’ rights and duties under a regulated credit agreement) of the Regulated Activities Order will include those activities as they relate to regulated deferred payment credit agreements.

Article 1 makes provision for the Order to come into force ahead of the date on which regulated deferred payment credit agreements will become regulated credit agreements for the purposes of the transitional provisions in articles 6 to 12 and to enable the Financial Conduct Authority (“FCA”) and the Financial Ombudsman Service to make rules and carry out other steps prior to regulation.

Article 2 amends the Consumer Credit Act 1974 (c.39) so that provisions including sections 55 (disclosure of information), 60 (form and contents of agreements), 76 (duty to give notice before taking certain action), 86B (duty to give notice of sums in arrears under fixed-sum credit agreements), 86E (failure to give notice of sums in arrears) and 87 (need for default notice) will not apply to regulated deferred payment credit agreements, as now defined in section 189. The FCA’s rule-making powers enable that authority to make rules relating to the subject matter of provisions disapplied by article 2.

Article 3 amends article 60F of the Regulated Activities Order (exemptions from classification as a regulated credit agreement relating to the number of repayments to be made) to exclude regulated deferred payment agreements. It also inserts a new article 36FB into the Regulated Activities Order to provide that activities in relation to regulated deferred payment credit agreements which fall within article 36A of that Order (credit broking) will be excluded from regulation, unless the person carrying out the activity does so at the home of an individual customer.

Article 4 amends the Financial Services (Distance Marketing) Regulations 2004 (S.I. 2004/2095) to disapply the effect of regulations 7 (information required prior to the conclusion of the contract) and 8 (written and additional information) of those Regulations for intermediaries of distance contracts where they are regulated deferred payment credit agreements and are within scope of the new article 36FB exclusion.

Article 5 amends article 15 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S.I. 2005/1529) which exempts certain sorts of introductions from the financial promotion restriction in section 21 of FSMA. The effect of the amendment is that introductions for the purposes of providing relevant consumer credit which involves a regulated deferred payment credit agreement do not fall within the article 15 exemption. As a consequence, financial promotions communicated by an unauthorised merchant who offers a third-party lender’s regulated deferred payment credit agreements as a method of payment will need to be approved by a FSMA authorised person under section 21(2)(b) of FSMA.

Articles 6 to 12 contain transitional provisions and provide for a temporary permission regime to be established, to allow the activities in relation to regulated deferred payment credit agreements brought within the scope of regulation by this Order to be carried on for a limited time as if the person concerned had a Part 4A permission under FSMA. Those wishing to obtain a temporary permission must register with the FCA, and article 12 makes provision about the timing of applications for a Part 4A permission.

Article 13 requires the Treasury to review the regulatory provision contained in the Order within 5 years of the Order coming into force and thereafter at intervals not exceeding 5 years.

A full impact assessment of the effect that this Order will have on the costs of business, the voluntary sector and the public sector is available from His Majesty’s Treasury, 1 Horse Guards Road, London SW1A 2HQ or on www.gov.uk and is published alongside the Order on www.legislation.gov.uk.