The Consumer Credit (Enforcement, Default and Termination Notices) (Coronavirus) (Amendment) Regulations 2020 were laid before Parliament on 11 November 2020 requiring changes to be made to the form of notices used by a creditor or owner before they can take certain action or terminate a regulated credit agreement.
The regulations are being amended to:
- prohibit the use of text in block capitals (for the most part seen in prescribed statements creditors and owners are required to include);
- change the prescribed language the notices use (moving away from terms like “judgment” and “enforcement” and including additional explanatory text where a lender/owner refer to a “surety”); and
- simplify the wording and order of the prescribed statements to aid consumer understanding.
The changes take effect on 2 December 2020. Firms have until 2 June 2021 to move to the new approach.
Background
The changes are being made to reflect findings in 2018 of the Money and Mental Health Policy Institute that amending letters sent to those in debt would have a difference on consumer mental health (the Institute found that over 100,000 people in problem debt attempt suicide each year).
The changes are also being made in response to economic and mental health impacts of COVID-19.
The regulations are focused on mitigating possible triggers for vulnerable indebted customers, toning down the way the information is presented to make it less threatening and easier to understand.
Issues
The amendments are not intended to change the underlying message of the relevant forms, merely the manner in which such message is delivered. However, there are a couple of minor drafting issues in the new text that lenders and owners should note.
- It appears the word “to” has been omitted in the new form of statements relating to “time orders” allowing more time to pay, with the result that the new wording comes across a trifle mangled.
- There appears to have been an unintentional change to the section 87 default notice wording that highlights the risk that a debtor might end up paying more than the agreement amount following a court judgment if they are also required to pay interest after that judgment. Previously this was presented as a possibility. Now the text says the debtor “will” have to pay interest.
Both are almost certainly oversights; however in the latter case the change could serve to make the statement more threatening, rather than less.
Given the repercussions of getting notices wrong, lenders and owners will want to ensure changes are made and double checked as a matter of priority.
Next steps
The changes take effect on 2 December 2020.
Changes will need to be made to your relevant notice templates so that lenders and owners are using the new version on and from 2 June 2021 at the latest.
If you would like to discuss any of the above, please contact us.
Authored by Charles Elliott
