The FCA has published a new consultation in respect of proposed guidance for guarantor loans. This consultation follows the FCA’s initial consultation on this issue in February 2016.

The proposed guidance covers the interpretation of “enforcement” under section 87 of the Consumer Credit Act 1974  in relation to guarantor loans and, accordingly, when a default notice will be required.

The FCA’s proposed guidance is that the following amounts to enforcement:

  1. the lender demands payment by the guarantor; or
  2. the lender takes payment from the guarantor by using a CPA or direct debit mandate that was previously provided and without at least appropriate notification to the guarantor.

On the other hand, the proposed guidance is that the following does not amount to enforcement:

  1. the lender receives a voluntary payment from the guarantor, following notification of the borrower’s default, and without any element of compulsion; or
  2. the lender requests payment by the guarantor, but making clear that this is not a demand for payment.

The full guidance consultation can be found here.

Any comments in respect of the proposed guidance are due by 25 November 2016.