CCTA View

The latest employment figures from the Office of National Statistics published earlier this week, have reported an unexpected increase in the unemployment rate to 3.9% in the June-to-August period after the number of people in work fell by 56,000. The combined effects of a global slowdown, political uncertainty and Brexit have impacted high street retail jobs and the manufacturing sector where a number of redundancies have taken place. As Brexit-related uncertainty has continued, many firms are deferring significant hiring and investment decisions, so a softening of the labour market could well be expected to continue in the short term, at least. As noted by the JCRA, the labour market seemed to have been isolated from the overall weakening of the economy this year, but the steepest fall in employment in over four years shows businesses are getting ready for Brexit by cutting jobs. Combined with reports pointing to consumer spending also now slowing, this may be indicative of more uncertainty in the jobs market and could result in economic output turning negative, as we saw in the second quarter. Even a short period of unemployment can hit a significant number of hard pressed consumers who may need access to responsible credit to see them through a short period of financial upheaval, especially when many are on zero hour contracts or form part of the gig economy. While regulation of credit is required to ensure firms lend responsibly it is important the regulators and politicians alike ensure access to credit is maintained and safeguarded as consumers may have a justifiable need to smooth out occasional erratic incomes. Access to fair and reasonable financial products from regulated lenders who undertake robust affordability checks on borrowers, and operate fair, transparent charges will help support those consumers who are struggling to manage their cash flow or need help to cover emergency, unexpected costs.

10.5 million Britons are in the worst financial position of their lives New research commissioned by FairMoney.com has revealed that an astounding 10.5 million Britons are in the worst financial position of their lives. The research, entitled ‘Brexit Broke Me’ has also found that over half of Britons (53%) have disposable incomes of less than £0. This is a dire situation for many households as the gap between the ‘haves’ and the ‘have not’s’ is increasingly widening and the aggressive nature of current regulation forces more consumers into financial hardship by default. The outlook for the 9,000 Thomas Cook former employees is especially bleak. These workers are particularly vulnerable as they have been left with no compensation for their loss of jobs. Fair Finance has rightly highlighted that many of these former employees are having to turn to friends and family for cash “in a bid to stave off financial woes.” Sudden income shocks such as this can have a disastrous effect on household finances especially if individuals and families are already financially constrained and do not have access to emergency, responsible credit. It is encouraging that organisations such as Fair Finance are fighting hard for consumers to have freedom of choice from different lenders. As Dr Roger Gewolb, Founder and Executive Chairman of FairMoney.com warns: “In the way that Thomas Cook has unravelled before our eyes, if further collapses of major employers occur, we shall unfortunately see the extent to which Britons are struggling to make ends meet. Personal finances across the UK are being crippled, yet there seems to be very little being done to secure people’s futures… “The…lack of provisions for fair finance….means that people in dire need of small, doorstep loans have reduced accessibility…” As representatives of the short-term credit and wider consumer credit market, we absolutely must continue to campaign to Protect Access to Responsible Credit. There has never been a more urgent time or need to maintain consumer access to responsible credit in order to assist with the peaks and troughs of expenditure and everyday life. CCTA will be at the front and centre of Protect Access to Responsible Credit (PARC) campaigns. Our National Conference on 7th November will be a clarion call to all our Members to get behind the PARC programme and fight for the financial rights of all consumers.

Any belief that the summer holidays and time away would ease the political logjam that is Brexit has floundered before Parliament returns on 3rd September, and with it any reasonable hope that constructive discussions could begin with Government Departments, on the business issues of the day. Suspending Parliament just days after MP’s return to the House, with only a few weeks before the Brexit deadline, serves only a group of Politicians. It also moves us closer to a General Election with a real bugger’s muddle likely, and the possibility of a hotchpotch of a rudderless Coalition Government with a narrow perspective. On the plus side the PM is genuinely raising the mood of the country, and with it the Conservatives in the opinion polls. Over regulation of the consumer credit Industry is already creating a lack of access to responsible credit for many. As the cost of compliance rises, and further unnecessary regulatory tinkering takes place, harsher credit scoring restrictions on availability will come into play, especially for young people and those on low incomes. We therefore applaud the article in the Times yesterday by Robert Jenrick MP, Secretary of State Housing, Communities & Local Government addressing affordable shared home ownership for young people, and those on lower incomes. It is refreshing to see aspiration being recognised as a positive feature of credit, rather than the well trodden route of credit being a millstone around consumers necks. The youth of today is our tomorrow and they should be encouraged to be the best they can be, and to aspire in a world that rewards the knowledgeable and the brave. We sincerely hope that the tide has turned against credit most often being seen as potentially bad for the consumer. We hope that as part of the “ very exciting agenda “ that the PM will outline in the Queen’s on 14th October we will see more funding going into education, including the ‘ lifeskills ‘ arena such as financial education, especially budgeting and money management. There are many charitable organisations that do a sterling job in this area, my grandchildren for example have hugely benefitted from the Student Money Manual provided by The Money Charity in their first year away at University. However they would have benefitted more if the early ground work on understanding money, had been an integral part of the formal school curriculum. One cannot doubt that the PM will be steadfast in his intent to see an end to Brexit, however the ship may well be blown off course, as the Parliamentary factions plan and scheme. If prorogation happens as expected, it will see Parliament closed for 23 working days. During the process of prorogation, no debates or votes are held. Most laws that haven’t completed their passage through Parliament die a death. There will be many twists and turns over the next few months, with the possibility of a poor outcome for business, and Consumer Credit industry in particular. The CCTA is increasing it’s Public …

Written for, and published by Credit Strategy – JULY 2019 GO TO WEBSITE + Just when we thought the uncertain environment within which we operate could get no more opaque, we’re met with further changes from FOS and indeed, a question on the competence of the FCA. When the FCA’s Chief Executive Andrew Bailey and Chair, Charles Randell appeared in front of the Treasury Select Committee to present a biannual report on the work of the FCA they were greeted with a question from its’ Chair, Nicky Morgan asking if “anyone at the FCA read the papers?” If that didn’t make Bailey wince, he was then questioned on why the City regulator didn’t act sooner after a press article reported on Neil Woodford’s use of Guernsey’s stock exchange to avoid breaching fund rules on unquoted stocks. Also last month, more than a dozen MP’s called for Mr Bailey to resign following the collapse of mini-bond holder London Capital & Finance, which went into administration in January owing more than £230m. Despite this, Mr Bailey went on to tell the TSC that the FCA were “taking seriously” the option of extending their perimeter to help mortgage prisoners by regulating unauthorised and inactive lenders. Mortgage lending is generally regulated but borrowers can find themselves stuck with an unregulated lender if their loan becomes sold on as part of a loan book sale. His remarks come hot on the heels of the FCA’s first annual report on the perimeter which was published last week and sets out: · what the FCA does and doesn’t regulate · what challenges the perimeter presents and the actions the FCA is taking to overcome them · what this means for consumers · whether there are any issues with the perimeter which might require legislative or other changes. The report resulted from a recognition that the current perimeter boundary is continuously tested by firms and activities who do or don’t require regulation and that some such firms have caused serious consumer harm and reduced trust in regulated financial services markets. One such example is the claims industry with some claims management companies looking to be regulated by the Solicitors Regulation Authority (SRA), instead of by the FCA. Consequently the two regulators are working together to “keep a level playing field and prevent CMCs arbitraging regulatory requirements” and have agreed a specific Memorandum of Understanding on supervising CMCs. This will be welcome news to the many consumer credit firms blighted by spurious claims from CMC’s looking for new opportunities as the PPI deadline looms. The CCTA has repeatedly warned about claims companies who have corralled consumers into pursuing compensation and excessive and vexatious demands since August last year following the collapse of Wonga and the effect it has on market exit within the industry. Just last month, This is Money revealed the latest affected lender – The Money Shop – reported to have ceased trading due to the ‘unprecedented number of customer complaints”. So,it is with some optimism that …

This week, the FCA published a report on the alternatives to high-cost credit (HCC) and set out the actions and recommendations to improve the availability and awareness of those seeking an alternative to HCC. The report also notes that ‘the consideration of access to alternatives to high cost credit will become an integral part of the FCA’s overall work in the credit sector, reflecting the part alternatives can play in improving consumer outcomes.’ Yet, while the FCA’s intentions are understandably well meant, a scan of the publication suggests little more than a sprinkling of motherhood and apple pie, and questionable aspirations for solving access to affordable credit for consumers who are temporarily financially struggling The report recognises that there are 3 million people use HCC in the UK, often driven by unexpected expenses including the need for essential household goods either when moving house or after breakages. The growth in gig economy workers is also a factor in demand for HCC, and the years of austerity have seen the ‘just about managing’ consumers squeezed even further. Of all the alternatives to HCC, it is the credit union sector which is the most lauded despite being polarised between a small number of large credit unions, and many smaller credit unions. There are over 400 credit unions making loans to over 1.8 million members across the UK and credit unions are lending around £1.5bn to their members. The FCA admits that ‘in the short term at least, the capacity of credit unions to make credit available to a significant portion of HCC users is limited, although the larger credit unions have shown that there is scope for growth without the need for any legislative change. Credit Unions face several challenges which includes the viability of offering credit at 3% interest per month to higher risk consumers, a reliance on branch presence and a restrictive legislative framework when trying to broaden the product range. Yet the report also considers alternatives such as Community Development Finance Institutions, an option to combine credit and household goods such as credit unions partnering with a supplier of furniture or household goods, budgeting government loans and grants for essential household goods. The FCA provides a number of recommendations for improving the market to HCC and increasing consumer awareness. It did consider asking regulated firms to signpost consumers to lower-cost credit when rejecting loan applications but rejected this as the consumer may not be lent to by the alternative provider and it would require lenders to understand each other’s criteria more than can be reasonably expected. However while the regulator can make some changes within its own environment such as extending the exemption from its own fees for CDFIs from April 2019 onwards and providing support to RSLs help them obtain credit broking authorisation it is clear that the FCA views the provision of alternative providers as a collaborative effort and works with several others including the Money and Pensions Service, End High Cost Credit Alliance and Fair4All Finance. …

The Financial Conduct Authority (FCA) has come under the cosh of late and this showed no signs of abating on Tuesday when Chief Executive, Andrew Bailey and Chair, Charles Randall appeared in front of the Treasury Select Committee to present a biannual report on the work of the FCA. Chair, Nicky Morgan crushingly asked if “anyone at the FCA read the papers?” [1] She then questioned Andrew Bailey on why the City regulator didn’t act sooner after a press article reported on Neil Woodford’s use of Guernsey’s stock exchange to avoid breaching fund rules on unquoted stocks. CM Direct, the firm owned by Gina Miller and her husband Alan, have also called for a “root and branch” review of the FCA in the wake of the Woodford fund scandal [2], and last month more than a dozen MP’s called for Mr Bailey to resign following the collapse of mini-bond holder London Capital & Finance, which went into administration in January owing more than £230m [3]. In spite of all this, during yesterday’s evidence session, Mr Bailey revealed the FCA were “taking seriously” the option of extending their perimeter to help mortgage prisoners by regulating unauthorised and inactive lenders. Mortgage lending is generally regulated but borrowers can find themselves stuck with an unregulated lender if their loan becomes sold on as part of a loan book sale. Mr Bailey told the committee: “We have to take seriously extending the regulatory perimeter and saying that mortgage lending should be a regulated activity because that would allow us to make rules in that space…I’ve been thinking a lot about it and I don’t know of another solution to this, honestly [4].” His remarks come hot on the heels of the FCA’s first annual report on the perimeter which was published last week and sets out [5]: • what the FCA does and doesn’t regulate • what challenges the perimeter presents and the actions the FCA is taking to overcome them • what this means for consumers • whether there are any issues with the perimeter which might require legislative or other changes. The report resulted from a recognition that the current perimeter boundary is continuously tested by firms and activities who do or don’t require regulation and that some such firms have caused serious consumer harm and reduced trust in regulated financial services markets. One such example is the claims industry with some claims management companies looking to be regulated by the Solicitors Regulation Authority (SRA), instead of by the FCA. Consequently the two regulators are working together to “keep a level playing field and prevent CMCs arbitraging regulatory requirements” and have agreed a specific Memorandum of Understanding on supervising CMCs. This will be welcome news to the many consumer credit firms blighted by spurious claims from CMC’s looking for new opportunities as the PPI deadline looms. The CCTA has repeatedly warned about claims companies who have corralled consumers into pursuing compensation and excessive and vexatious demands since August last year following the …

Over the weekend, an article published by the This is Money website gave a refreshing insight into the provision of home credit. The home credit industry is frequently maligned in the press and by consumer activists but this particular article highlighted how there are approximately 10 million people in this country who cannot borrow from mainstream banks or building societies. And of those 10 million, more than 1.5 million cannot access any form of online credit. This potentially leaves many consumers exposed to illegal lenders so I welcome the mission of Morses Club boss, Paul Smith who aims to modernise the business and expand into new areas such as Visa debit cards on which loans can be loaded onto and online lending. As we have repeatedly maintained, different customers have differing credit needs but all have a right to access responsible credit, and a right to choose what credit they require. Morses Club provides a number of credit options to its customer bases, including its online lending brand, Dot Dot Loans which recently expanded by 50,000 customers when the company acquired most of Curo Transatlantic, after it fell into administration. However, while Smith is looking to increase his customers numbers to 250,000 for both home credit and online borrowers, the article notes that growth will not come at the expense of profitability, as “Morses has a robust track record and is determined to maintain it”. The product diversification of Morses Club is a welcome feature in an industry which is currently being strangled by regulatory creep so I fully endorse the company in its continued plans to provide responsible credit to borrowers. The CCTA will always work with legislators and the regulator to find the right balance between access to responsible credit and protection as we aim to ensure the market provides a valued service, but proportionate regulation is a must if we are to deliver the best outcome for consumers. Greg Stevens CEO

The great and the good of business and politics have congregated today at the British Chambers of Commerce annual conference. Adam Marshall, director-general, gave a pointed and remarkable opening address as he accused politicians of “letting British business down.” He told the conference: “We are frustrated. We are angry. You have let British business down. You have focused on soundbites, not substance. Tactics, not strategy. Politics, not prosperity.” I applaud Adam’s stance and his position on this subject as he told delegates that Westminster should spend more time helping existing businesses to win new customers. He also lamented the “Brexit black hole” that is contributing to a “growing list of business casualties” in the face of persisting uncertainty and accused politicians of “chasing rainbows” in the face of mounting economic damage. As Calum Jones’ eloquently describes today in The Times, today would have been Britain’s last full day in the European Union had Theresa May and European leaders not agreed to an extension to allow her more time to push her Brexit deal through parliament. As Whitehall officials prepare for negotiations with possible trading partners, including the United States and New Zealand, Mr Marshall urged them not to be distracted by the prospect of new trade agreements outside the EU. He called for an approach on trade “that fixates less on the political symbolism of trade agreements” and concentrates more “on helping businesses in the real world to win new customers and explore new global markets”. During conference, Mr Marshall said that “businesses and communities in every part of the UK are still unsure about when the future starts, let alone what it holds. Three years going round in circles. Three years is long enough.” While Mr Marshall accepted that some companies believed that leaving the EU without a deal would “draw a line in the sand” and provide “the certainty they so desperately crave.” He also identified that “this would have very real dangers,” and “would coincide with a looming slowdown in both global and UK economic growth.” An outcome that would be “unthinkable without clear leadership and a clear plan.” During the conference, David Lidington, Theresa May’s de facto deputy insisted that “from the prime minister down” the government was doing “all it can” to reach a Brexit outcome which honoured the result of the referendum but protected the British economy. I think what is very clear is that British businesses of all shapes and sizes and across all sectors are craving certainty and the support they need to help their businesses flourish and get on with the job of serving their consumers. As the Brexit debacle continues unabated, it highlights ever more strongly the need to protect access to services, be that access to responsible credit, or otherwise, to minimise further shocks to our economic and social systems. Greg Stevens CEO, CCTA 28th March 2019

Yesterday, I had the pleasure of addressing many MPs, political figures, the FCA and industry colleagues at the Credit Week Parliamentary Reception. As Chief Executive of the CCTA, representing over 200 businesses, including lenders, brokers, debt purchasers and suppliers to the industry, my message was about the proportionality of credit regulation. The regulator has a balance to strike between maintaining deep and fluid credit flows on the one hand, and appropriate levels of protection for consumers on the other. It is a difficult balance to strike, but it’s essential for serving the consumer’s interests. Get it wrong in one direction, and you restrict legal supply and cause financial exclusion. Get it wrong in the other, and you can encourage irresponsible lending. The FCA recognises the importance of keeping legal credit flowing. After all, without access to regulated sources of credit, there isn’t any consumer protection at all. Yet the sheer volume of regulation in the last 5 years, coupled with a spike in claims activity, are causing more businesses to exit the market. In parallel, the FCA’s own figures show a sharp rise in the number of consumers borrowing from ‘friends and family’ and illegal lenders. A key factor, in our view, is the FCA’s new rules on ‘affordability’. Tighter affordability rules mean many lenders are having to stop lending to certain groups of consumers. This includes customers on lower incomes with the fewest choices. But the tighter the restrictions, the higher up the socio-economic scale the cut-off goes. As a result, larger numbers of borrowers risk becoming excluded because, according to the regulator, they cannot afford to borrow. But many consumers are in situations where they cannot afford not to borrow, because the costs they would otherwise incur are higher than the cost of their borrowing. CCTA members don’t want to shirk regulation or responsibility. They want to do the right thing and work in partnership with the regulator and the debt charities in the consumer interest. But regulation needs to be proportionate. Otherwise we risk doing more harm to the consumer than good. My message at yesterday’s Parliamentary Reception was clear. We need balanced and proportionate regulation that delivers the best outcomes for consumers who are going to need access to credit, come what may. We will continue to work with legislators and the regulator to find the right balance between access and protection. Greg Stevens Chief Executive, CCTA 20th March 2019

Credit Week 2019: Parliamentary Reception Date: 19 March 2019 Venue: Houses of Parliament Time: 12.15 to 3.00 p.m. Good afternoon, it’s a pleasure to be here celebrating Credit Week with you. I would like to thank Credit Strategy for organising, and our parliamentary hosts for welcoming us to the Houses of Parliament. I’m Greg Stevens the Chief Executive of the CCTA, which is the largest of the consumer credit trade associations. We represent over 200 businesses, including lenders, brokers, debt purchasers and suppliers to the industry. Most of my members are small businesses serving local communities. My message today is about the proportionality of credit regulation. The regulator has a balance to strike between maintaining deep and fluid credit flows on the one hand, and appropriate levels of protection for consumers on the other. It is a difficult balance to strike, but it’s essential for serving the consumer’s interests. Get it wrong in one direction, and you restrict legal supply and cause financial exclusion. Get it wrong in the other, and you can encourage irresponsible lending. The FCA recognises the importance of keeping legal credit flowing. After all, without access to regulated sources of credit, there isn’t any consumer protection at all. Yet the sheer volume of regulation in the last 5 years, coupled with a spike in claims activity, are causing more businesses to exit the market. In parallel, the FCA’s own figures show a sharp rise in the number of consumers borrowing from ‘friends and family’ and illegal lenders. A key factor, in our view, is the FCA’s new rules on ‘affordability’. Tighter affordability rules mean many lenders are having to stop lending to certain groups of consumers. This includes customers on lower incomes with the fewest choices. But the tighter the restrictions, the higher up the socio-economic scale the cut-off goes. As a result, larger numbers of borrowers risk becoming excluded because, according to the regulator, they cannot afford to borrow. Greg Stevens CEO

An “alarming” number of cash-strapped families are being forced to borrow from illegal loan sharks or friends and family, MPs will be told this week. Greg Stevens, who runs the Consumer Credit Trade Association, is expected to accuse the Government of “trying to feed the five thousand with a cheese sandwich” after it introduced an “insufficient” no-interest scheme for those with problem debt last year. He plans to tell politicians on Tuesday that tighter regulations and “rogue” claims companies are not only driving controversial payday lenders such as Wonga into collapse but also more conventional players. Mr Stevens told The Sunday Telegraph that he expects the number of companies in the market to shrink by a further 10pc this year as under-pressure lenders consolidate or collapse. Source: The Telegraph GO TO ARTICLE +

The CCTA held a briefing this morning for personal finance journalists and bloggers ranging from the Daily Telegraph to the influential consumer site, DebtCamel. We wanted to talk about what we see as a looming ‘crisis of access’ to credit for those consumers on lower-incomes with the least choices, but also the mass market of credit consumers who we have termed “the squeezed out middle” (to borrow a phrase from Theresa May — there can’t be many people in public life doing that this morning). We wanted to call for some balance and proportionality in the regulation; and to find some consensus with consumer voices as to what ultimately is the best, or least harmful, outcome for consumers who are going to need access to credit come what may. Our over-arching message was that the cascade of regulation in the past 4-5 years has reached a point where the powers-that-be risk harming consumers instead of protecting them. There are two root causes of this problem — over-regulation (albeit well-meaning) and a claims racket of dubious legality that is targeting lenders with historic ‘affordability’ claims, seemingly aided and abetted by FOS which appears to be turning a blind eye to data and privacy breaches. The combined effect of this is a sharp increase in market exit and, as a consequence, a sharp reduction in access to regulated credit for consumers. This isn’t just a sub-prime problem, it’s beginning to affect the whole non-mainstream market, in other words the ‘squeezed middle’ is getting ‘squeezed out’. I was asked to provide an evidence base for this and I pointed to a number of factors including the rate of business closure in my own association and rising recorded numbers for ‘friends and family’ borrowing and properly illegal loan sharks. However, I also acknowledged that more research is needed, and specifically the FCA needs to carry out a comprehensive impact assessment of the welter of measures it has introduced in recent years to adjudge the impact on consumers’ access on legal sources of credit. Without access to legal sources of credit, there really isn’t any consumer protection at all. The situation with CMCs and FOS also needs looking at. I don’t contest that many of the historic affordability claims are legitimate, but a great many of them demonstrably are not. There are questions about the provenance of the data sets the claims companies appear to be using for their carpet-bombing sorties, as well as their compliance with new GDPR and privacy regulations. I was also asked about my assertion that tighter ‘affordability’ rules are having a counter-productive effect. It is a difficult argument to make because moves to make lending more affordable sound like such an obvious and uncontentious thing to do. In the vast majority of cases they are. But the unintended consequence is that increasingly tight affordability requirements mean that many lenders have no choice but to stop lending to certain groups of consumers. Those at the bottom of the economic tree are …