On 13th June the Treasury Select Committee heard from Andrew Bailey, Chief Executive, Financial Conduct Authority (FCA), as the Committee provided broad parliamentary scrutiny of the FCA’s work. As anticipated, the Committee discussed High Cost Short Term Credit, where Mr Bailey re-iterated the findings of the FCA’s recent HCC review.

During the Committee, we were very pleased to hear Mr Bailey resisting calls for blanket rate caps. The CCTA and its members were also delighted that he acknowledged the importance of maintaining access to credit for the millions of consumers who cannot access mainstream credit. He was very clear: caps have consequences.

Whilst the FCA has increased the regulatory burden on lenders and plans to do so again in the near future, it is apparent that they do appreciate the value of credit to society. Whilst we were disappointed with aspects of last weeks announcements, the CCTA were pleased to see the FCA take a somewhat balanced approach to their High Cost Credit Review. At today’s Select Committee hearing this was made more apparent as Mr. Bailey was the voice of reason. It is easy to rabble-rouse against lenders and demand the supply of credit be more restricted. What is apparently harder to is read up on the facts and understand the negative impacts this would have on millions of families around the country.

There was also rare but welcome recognition of the positives of home collected credit. The debt campaigners are angry not to have won a cap on home credit, but Bailey rejected demands to reconsider. He understands that the borrower-lender relationship sets home credit apart from other models. This is a small but welcome step forward.

On alternative credit options, Mr Bailey acknowledged that outside of Northern Ireland Credit Unions are underdeveloped in the UK, but importantly, that “they are not, on their own, the only solution” and that it would be a “great loss, if we cut off people from credit.”

Indeed, there has not yet been a single, viable, alternative credit solution that meets the needs of millions of lower-income consumers for access to credit. It is easy to argue that the FCA’s review does not go far enough in its proposed restrictions on lending – but what is more difficult, is to find an alternative that hasn’t already been tried, tested and proven to flounder.

Greg Stevens

CEO, CCTA

14th July 2018