CCTA View

As the Mansion House speech nears, we’ll be listening closely for signs of regulatory reform. Rumours are circulating, some undoubtedly floated to gauge reactions. We were interested in learning about reports of further progress on reforming the Financial Ombudsman Service (FOS).

At the end of March we held our Vigilance Conference in central London. Delegates attended from across the CCTA membership including lenders of various sizes, brokers and associates. Addleshaw Goddard kindly hosted the event at their London offices.

On 7 March, the FCA published their findings into a review of firms’ treatment of customers in vulnerable circumstances, including their consumer research and examples of good and poor practices. It is clear that vulnerable customers remain a top priority for the regulator, and rightly so. They should be a priority for firms too.

I’m delighted to introduce myself as the new Membership Manager at the Consumer Credit Trade Association (CCTA). It’s an exciting time to join the organisation, and I’m eager to connect with all of you – our valued members – to ensure that you receive the best possible support, insights, and services that CCTA has to offer.

Over the past year, I’ve represented the Consumer Credit Trade Association on the Industry Working Group (IWG) tasked with developing proposals for a new Credit Reporting Governance Body (CRGB). It is an important and potentially far-reaching piece of work that could change the way credit data is overseen in the UK—and it’s vital that smaller and specialist lenders are not just consulted but properly considered in how the new regime is shaped.

Earlier in the spring, the FCA launched its new five-year strategy that will run until 2030. The aim is to deepen trust, rebalance risk, support growth and improve lives. The regulator has outlined four main themes for its future areas of work as part of the strategy which can be seen below: Be a smarter regulator – predictable, purposeful and proportionate. The FCA will improve its processes and embrace technology to become more efficient and effective. Support sustained economic growth – by enabling investment, innovation and ensuring the continued competitiveness of the UK’s world-leading financial services. Help consumers – to navigate their financial lives by working with the wider industry to boost trust, product innovation and ensure the right information and support is available for people to take informed financial decisions. Fight financial crime – by focusing on those who seek to do harm. The strategy will go further to disrupt criminals and support firms to be an effective line of defence. We have reviewed the strategy and welcome much of the shift in tone. There is the promise of a move away from over-cautious regulation towards a more proportionate, risk-balanced approach. The FCA acknowledges that regulatory standards – while essential – can also unintentionally stifle innovation and create barriers for new entrants. The new strategy promises a more flexible process and smarter use of data. Despite this rhetoric of risk rebalancing and smarter regulation, just now the burden of compliance remains heavy – especially for smaller firms. This is an area where we would like to see change. Elsewhere, the strategy makes clear that the Consumer Duty isn’t going anywhere. If anything, it will become more deeply embedded in how the FCA assesses conduct. Alternative lenders will need to continue evidencing that their products offer fair value, that communications support consumer understanding, and that they’re identifying and supporting vulnerable customers appropriately. Of course we have questions that we will pick up with the FCA in future meetings. Some of this may be a cultural challenge for the FCA. For example, many decisions and interpretations rest with various FCA teams, especially in the world of principles and outcomes. How do you ensure that this change reaches the frontline discussions between firms and the FCA? How will the FCA incorporate access to financial services as a measurable outcome of the strategy, particularly for underserved markets? We must not lose focus of the need to improve access to credit. What metrics will the FCA use to assess whether competition and investment have improved across different segments of financial services? We can focus on the big numbers, but we know that small markets help underserved groups. How do we track success or failure in these different segments? At the CCTA, we will continue to be a strong voice for smaller lenders – advocating for proportionate, practical regulation that allows responsible firms to thrive and serve consumers well. We will all need to work together to ensure the regulator delivers on the aims of its new strategy.  

Yesterday, the Chancellor met top regulator bosses in Downing Street to discuss an action plan on regulation. The review aims to cut the administrative cost of regulation, make Britain the best place to do business and drive economic growth. We applaud the ambition and the speed at which the Government has been moving. Action plan on regulation The plan aims to overhaul the regulatory system so that it: supports growth. Provide a regulatory system that not only protects consumers and supports competition, but also encourages new investment, innovation, and growth. is targeted and proportionate. The government should regulate only where necessary and allow space for discretion and good behaviour. is transparent and predictable. To foster the certainty essential for investment, it is vital that the regulatory regime is stable, predictable and consistent. adapts to keep pace with innovation. Our approach to regulation must allow the UK to take advantage of new technologies and innovations. We welcome these aims. Recently, we wrote about the importance of the smaller non-bank lenders we represent. A big part of their challenge is regulatory. We have long discussed the need to reduce the regulatory burden on firms, but we are increasingly also discussing the importance of certainty. Yes, as the Government has identified, compliance costs have increased considerably over recent years. We have long said that regulators’ cost-benefit work can be disappointing. It can lack an understanding of actual costs and seem to be built with banks in mind. Late last year, we wrote in the media about new proposals from the Financial Conduct Authority to ask lenders to provide detailed information about every transaction they carry out. This follows a vast amount of work to implement the Consumer Duty. The burden is real and pressing. Certainty is just as important as the burden. However, certainty is equally vital. It is key to have confidence that you understand the regulator’s expectations. It allows you to grow and develop without second-guessing everything you do. Let’s be very clear. This is not about deregulation. In many areas, certainty is about providing more direction, not less. It has essential knock-on impacts. Certainty gives firms confidence that they are compliant, but it is also vital in attracting the investment they need for growth. Certainty also ensures access to credit for individuals who struggle to borrow elsewhere, as firms can continue to offer services to these consumers rather than stepping back out of fear. The action plan also includes some specific measures for financial services. The Treasury will also explore ways to streamline financial services regulators’ ‘have regards’ to improve predictability and business confidence. Regulators will now also be subject to performance reviews twice a year. They will be judged against a set of targets agreed with the businesses they affect, such as how quickly they decide on planning applications and new licenses for companies and products. It would be good to see the FCA supporting new entrants into the alternative credit sector. Examining the role of the Financial Ombudsman …

Last week we submitted our response to the Call for Input on modernising the redress system. We took this as an opportunity to raise a couple of wider key topics that we were keen to include around the complaints process. One of these is dialogue with the industry around complaints, to improve outcomes for all concerned – firms, the Ombudsman, and ultimately, the consumer. While we believe there are some tangible changes that can be made to the process (which we raise within our submission) there is a need for a more significant change within the FOS, and how it interacts with the industry and other stakeholders. We believe that the FOS can significantly improve the current framework for managing matters with wider implications by developing a new culture, fostering greater transparency, collaboration, and efficiency. The Wider Implications Framework’s (WIF) role could be enhanced to better manage systemic issues and prevent escalation. Early identification of risks through the WIF would also reduce the likelihood of costly mass redress events and encourage proactive handling of systemic issues to deliver consistent and timely redress for consumers. So, we are calling for regular feedback loops and consultation mechanisms to be established to identify emerging trends collaboratively. This could include real-time communication channels and the establishment of stakeholder forums. Through this firms, consumer representatives and trade bodies could directly engage with the regulators. This would strengthen relationships between regulators, industry, and consumer groups. It would provide valuable insights to inform regulatory actions. There is an opportunity to enhance transparency, involving those outside the regulatory family also. Another area we have identified is the issue of time limits and the ambiguity that surrounds them. We strongly believe the FCA and FOS should review the current time limits for referring complaints to provide greater certainty for firms while maintaining fair consumer protections. The current rules—particularly the “three-year from the date of knowledge” provision introduce significant ambiguity, leaving firms vulnerable to open-ended liability and increasing the risk of inconsistent outcomes. To address this, we propose a few changes. We recommend introducing an absolute longstop from the event date, giving rise to the complaint. This would provide firms with a clear liability endpoint, while ensuring consumers have ample time to bring complaints. The “date you knew” rule should also be clarified. The three-year rule is subjective and inconsistently applied. We have seen the FOS place an unreasonable burden on firms to prove when consumers become aware of their right to complain. There should be a clear burden of proof that balances fairness between firms and consumers, ensuring firms are not unfairly burdened. We believe that this will help market integrity and competitiveness. In creating a predictable regulatory environment, it would encourage investment and innovation that has been so hard to achieve in alternative lending given their recent experience of the complaints system. These are two examples of areas that could be improved both to better handle mass redress events but also the wider complaints framework so it functions …

The news that Santander may leave the UK market has grabbed the headlines. There has been, and we are sure there will continue to be, a lot of discussion about the regulatory burden. The costs mentioned are significant, often more like telephone numbers. The risk is that we focus on those big numbers and the big brands. However, elsewhere, some lenders face burdens that are certainly smaller numbers but can significantly impact that firm. Last year, firms moved to implement the Consumer Duty, introducing new systems and structures. Over recent months, we have seen movement on new data systems required by the FCA. There are plans for a new governance body for credit information funded primarily by lenders. All of this adds up and makes it more challenging to operate. We would suggest that smaller independent lenders frequently provide agility, innovation, and customisation to meet the needs of UK families. We mustn’t lose sight of their health. Filling the gaps Filling that gap has always been an idea that is close to the CCTA. We were formed in 1891 by a small group of retailers and lenders that saw the need for new regulated credit products. Smaller lenders have always looked for the gaps as the banks focus on smoothing their processes. Many large banks focus on high-volume, standardised lending products, prioritising economies of scale. Unfortunately, this approach often leaves certain groups with non-standard credit histories or special borrowing requirements without access to financial support. Doing so, they help ensure financial inclusion, enabling consumers and small businesses to access credit that might otherwise be unavailable. This is particularly important in the consumer credit sector, where access to affordable lending can make a critical difference in people’s lives. Driving innovation and competition Smaller lenders are often at the forefront of innovation in financial services. Unencumbered by the bureaucratic layers that can stifle creativity in larger institutions, they are more nimble in adapting to emerging technologies and market trends. Many have pioneered advancements in digital lending platforms, open banking, and data-driven credit assessments, setting new standards for efficiency and customer experience. Moreover, smaller lenders foster competition within the financial services industry. Their presence challenges the dominance of larger players, encouraging a broader range of products and services at more competitive rates. This dynamic benefits consumers, ensuring they can access choices that better suit their needs. Supporting local economies The impact of smaller lenders extends beyond their immediate customers to the communities they serve. Unlike global banking giants, many smaller lenders have strong ties to their local areas, which enables them to understand and respond to the unique challenges and opportunities within those communities. Smaller lenders often take the time to build relationships and trust within their communities, creating a ripple effect of economic resilience and opportunity. That includes CDFIs and credit unions, alongside commercial branch-based lenders. This localised approach is particularly evident in areas where access to finance is limited due to geographic or socioeconomic factors. We have seen the loss of …

As many of you will know, the motor finance world was hit hard in October with the Court of Appeal judgment in the Johnson v FirstRand Bank Limited, Wrench v FirstRand Bank Limited and Hopcraft v Close Brothers cases. The Court of Appeal decided it was unlawful for motor finance brokers to receive a commission from the lender providing motor finance without getting the customer’s informed consent to the payment. This decision surprised many because this case marks a significant shift in how Courts view lenders’ duties toward consumers in cases involving commission payments. Firms were tasked with making changes to their processes very quickly. This decision came on the back of what has already been a very busy year for motor finance providers. In January this year, the FCA launched a review of historical motor finance Discretionary Commission Arrangements (DCAs). The review seeks to understand if there was widespread misconduct related to DCAs before the 2021 ban, if consumers have lost out and, if so, the best way to make sure appropriate compensation is paid in an orderly, consistent and efficient way. Alongside the review, motor finance firms were given more time to provide final responses to complaints about motor finance where a DCA was involved, and consumers more time to refer their complaints to the FOS. This was to prevent inconsistent and inefficient outcomes for consumers and knock-on effects on firms and the market while the FCA reviewed the issue and determined the best way forward. In September, the FCA further extended this until 4 December 2025. Before deciding its next steps, the FCA wanted to take account of relevant court decisions. These included the judicial review by Barclays Partner Finance of a Financial Ombudsman decision relating to a DCA in a motor finance agreement and the recent Court of Appeal judgment mentioned above. Last week we got the news that the Supreme Court will hear an appeal against the Court of Appeal’s judgment. This will likely take place between January and mid-April next year. While the Supreme Court will hear an appeal, firms must still comply with the law as it stands when arranging new motor finance agreements. There was further movement today when the FCA confirmed that it will extend the time firms have to respond to complaints about motor finance agreements, not involving a DCA. Firms now have until after 4 December 2025 to provide a final response to non-DCAs, in line with the extension already provided for complaints involving DCAs. The regulator has also provided guidance for firms when communicating with affected customers. If you are reviewing your approach, we suggest this as an essential checklist of issues. So, it has undoubtedly been a tumultuous year for the sector. Firms should be focusing on ensuring that they are communicating with customers in the right way, whilst also preparing for the continuation of the FCA’s review. The FCA plans to set out next steps in May 2025, but this will be somewhat dependent on the progress of the appeal to the Supreme Court and the …

Access to credit has always been central to the work of the CCTA since it was founded over 130 years ago. We have a long-standing project to protect access to responsible credit for customers that often struggle to borrow elsewhere. In recent months, we have seen a greater interest in access to credit and financial inclusion from a range of external stakeholders which as been encouraging. Firstly, we have seen this from the new Labour Government. Prior to the announcement of the General Election, the Labour Party outlined its commitment to a National Financial Inclusion Strategy, should it gain power. This was reinforced by Tulip Siddiq MP, the Economic Secretary, at the party conference which took place in September. The Secretary said that the strategy will be designed and implemented by a committee chaired by a treasury minister with representation across government, regulators, and industry. Through writing to the Secretary, and in our regular discussions with HM Treasury officials, we have expressed our desire to play a role in the process. We believe the experience our members have of lending to those currently will be vital to the development of the strategy. Over the last few years, we have tried to draw attention to the significant reduction in the supply of regulated credit for those consumers who cannot access the prime credit market. Well-regulated alternative credit can play a role in meeting unmet demand within the wider consumer credit market. Though we support Credit Unions and CDFIs—indeed, they form part of the CCTA membership—these organisations alone cannot fill the gap that has been left. We believe a blend of commercial and not-for-profit providers is needed to solve the current problems and address the use of loan sharks. This is the message we have been trying to convey in recent meetings. Our conference also was an opportunity to hear from other stakeholders about their work in this area. Fair4all Finance talked about their desire to work with the private sector on new products, referencing the c.2 billion of estimated current unmet, but potentially commercially viable, credit quoted recently by L.E.K. Consulting. Discussions continue with members of the CCTA about potential partnerships. We were also lucky enough to have Chris Pond, Chair of the Financial Inclusion Commission speak. Unsurprisingly, they are supportive of the new Strategy promised by the Government. The Commission has released new research carried out by the Centre on Household Assets and Savings Management (CHASM) at Birmingham University, which highlights the harms financial exclusion continues to cause in communities across the UK. This is a problem that needs to be addressed. We have also seen the regulator take a greater interest in access to credit in recent times. The FCA has been keen to engage with the sector on the issue and we have taken the opportunity to raise the role the industry can play in improving access to credit, as part of wider discussions on growth and innovation. Financial exclusion is costly to the country. The credit products offered by …