FCA Performance – Meeting expectations or requires improvement?

Published 01 July 2019

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 …

CCTA welcomes the plans of home credit lender, Morses Club, which will provide more access to responsible credit

Published 16 April 2019

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

UK businesses tell ministers to act now to stem the flow of business casualties and the litany of rising costs.

Published 28 March 2019

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

My message to legislators, the regulators and industry colleagues for Credit Week 2019

Published 20 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

Speech: Greg Stevens at the Credit Week Parliamentary Reception

Published 19 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

Credit industry crisis is ‘leaving families at mercy of loan sharks’

Published 17 March 2019

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 +

In Search of Balance and Consensus

Published 14 March 2019

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 …

Time for the FCA’s helicopter parenting approach to credit users to end and let them make their own choices

Published 07 March 2019

The last few weeks have seen an unprecedented number of press releases from the Financial Conduct Authority regarding the consumer credit industry. The regulator has good intentions like any worthwhile organisation but its current cosseting approach does the consumer a disservice and is consequently narrowing their availability to responsible, regulated credit. In August 2018, Sky News reported on my concerns that the collapse of Wonga would lead to more lenders entering into administration and this would subsequently result in consumers turning to illegal lenders or placing pressure on friends and family instead. In just a little over 6 months since the article was published, we have seen the collapse of further lenders in Curo Holdings Plc and Oakam Ltd and the cessation of online lending and sale of stores by The Money Shop, while some lenders in other areas of high cost credit have issued profit warnings or are struggling to deal with the mass number of historical redress complaints being sent to the Financial Ombudsman by dubious claims management companies. In the meantime the Money Advice Service found £96 billion of debt is hidden from friends and family with many of those in debt saying that they don’t want to burden others with their financial issues. This would suggest many may find it difficult to approach friends and family about borrowing a loan which could lead to some consumers opting to use an illegal lender. A recent Channel 4 documentary saw illegal lenders referring to themselves as “a necessary evil” and describing how “business is booming” . Only last week, a court heard how a loan shark had started ‘in a small way’ in 2012 but by 2018 he was making £1,500 a week with a total of approximately £450,000. The Sky News article also referred to the CCTA’s views on how the “combination of consumer pressure and political intervention had hobbled an industry that served “the majority of consumers”. Sadly this situation has remained unchanged and the regulatory creep has actually extended across the high cost credit industry as a whole, as the FCA have capped the rent-to-own sector, are assessing the options for intervening in the motor finance market and have warned they will be taking a closer look at the cost of guarantor loans. This continuous barracking of the industry by the regulator is proving too much of a challenge to smaller lenders whose daily operations are being hampered by compliance costs and tick boxes. Many are reluctantly looking to exit the market which means only the larger companies will survive, therefore limiting consumer choice. Customers have a right to access responsible credit, and a right to choose what credit they require. The FCA used to say it wasn’t a price regulator but it increasingly feels like policymakers are happy to accept the notion of intervening on market prices, egged on by consumer activists and distracted politicians. Freedom of choice is slowly being will be taken away from the consumer, and especially the consumers who most …

The financial grip squeezes ever tighter as one third of UK workers need a second income to make ends meet

Published 22 January 2019

The squeeze on people’s disposable income is growing ever tighter as the need for financial smoothing devices for many of the UK’s workers grows ever more important. New research from Gettasub has found that one third of workers (32 per cent) are actively considering taking a second job in order to stay afloat. In the last month alone, over one third (34 per cent) of workers admitted to having suffered sleepless nights due to financial worries. Whilst just over one in ten (13 per cent) also said they were planning to skip work to avoid travel costs. Additionally, 48 per cent of workers believe the botched Brexit situation will make their financial situation worse. When asked about how much the workers had overspent during the Christmas break, 29 per cent of respondents said they overspent by between £51-200 and 22 per cent by 201-£400. Additionally, one in ten (13 per cent) said they overspent by between £401 – £1,000. Only one third confirmed that had not overspent during the festive period. The month of January topped the list as the gloomiest month, with over half (55%) of workers saying it was the month they were the worst off. The research also found that many people were increasingly turning to credit cards in order to stay afloat. Nearly two in 10 people (19%) said they had to borrow money from friends and family to make ends meet. Greg Stevens, CCTA CEO comments: “The need to preserve access to responsible credit is greater than ever. Many of the UK’s hard working families are struggling to make ends meet and are looking for fair and accessible credit to smooth the peaks and troughs of their financial lives. “At the CCTA, we are making it our mission to campaign for access to responsible credit and to ensure that there is a balanced debate with the regulator and consumer groups. We intend to help prevent overly restrictive regulation from cutting off the essential supply of short-term credit for those who need it.” https://www.gettasub.com/

Tis’ the season of political uncertainty!

Published 12 December 2018

Today’s announcement by the 1922 Committee has meant we now have another round of madness as Conservative MP’s go for a Leadership Election, at the same time as the Prime Minister cavorts around Europe attempting to give CPR to a corpse. Nero is fiddling even faster as Rome burns. The real danger is that she wins with a majority in single figures and the Party becomes unmanageable for a year, as she can’t be challenged again for a 12 month period. There are so many divisive pivotal splits in the world at the moment that means democracy as we know it is under dire threat. This will create disunity and chaos – the bedrock for altercations and violence with potential escalation across borders. Weak government allows extreme regulation to creep through as scrutiny becomes less diligent. In turn that produces unintended consequences to the very people it was designed to protect. The Financial Services Industry needs to step up its game to protect access to responsible credit for the consumer, despite the Westminster political confusion and games. Collaboration and meaningful discussion appears to be missing in so many areas of modern life. Changes are imposed, to be challenged and then modified. We see so many current projects having expensive fixes as the collaborative reasoning at the beginning is not good enough, or enough time is not given to fully understand all of the lobby group’s rationale. To cap all of this, the UK is fast becoming the laughing stock of Europe, if not the world. The outcome of the leadership contest is awaited with trepidation and hope that the UK ship will ultimately be steadied and set sail in the right Brexit direction. Greg Stevens CCTA CEO 12th December 2018

Leaving the EU will be costly, but what is the price of remaining?

Published 03 December 2018

David Smith, wrote an insightful piece in The Times this week (Nov 27th) on why leaving the EU will be costly, but what is the price of remaining?   David, who spoke at our annual CCTA conference earlier this month, describes how the endgame of the first phase of Brexit is proving “even messier than feared.” Theresa May, by trying to appeal directly to voters over the heads of MPs who oppose her deal, is adopting tactics that might work in a second referendum, though she has said that she is implacably opposed to that. David’s view, which is shared by many in financial markets, is that “in the end a withdrawal agreement something like hers will be backed by parliament, but it will be a rocky road.” Here’s why: “Through all the ups and downs of the process, the overwhelming conclusion from economists is that leaving the EU will shrink the economy and make us poorer.The National Institute of Economic and Social Research calculates that under Theresa May’s preferred deal the economy in the longer term — by 2030 — will be about 4 per cent smaller (3 per cent for gross domestic product per head) than if the UK had stayed in the European Union. Garry Young, its head of macromodelling and forecasting, put it well: ‘We estimate the long-run cost of leaving the EU on the government’s preferred deal to be roughly equivalent to losing the annual output of Wales.’ An assessment this week from researchers at the London School of Economics, King’s College and the Institute for Fiscal Studies for the think tank UK in a Changing Europe concluded that GDP per capita would be between 1.9 per cent and 5.5 per cent smaller by 2030 under the proposed deal compared with staying in the EU. The range reflects different assumptions about productivity. When it comes to forecasts, a consensus view for the short term, including the bodies responsible for the new assessments, was that the economy would be about 3 per cent smaller than otherwise by the end of this decade as a result of Brexit. Such forecasts are exactly on track. Mrs May and her negotiating team have done well to secure a withdrawal agreement in difficult circumstances. Her aim has been to respect the letter of the referendum with the minimum amount of economic damage. Other options, including leaving on World Trade Organisation terms, would be even more damaging, about double the negative effect, according to the new assessments. We are nevertheless in the unusual position of a government trying to enact something that it knows is bad for the economy. As time has gone on, so the supposed economic gains from Brexit, a bonfire of red tape, lucrative trade deals and the fantasy of unilaterally abolishing all trade restrictions — a great way of destroying your manufacturing and farming industries — have all been exposed as bluster. We are left with reducing EU immigration, which will damage the economy. Why would any …

CCTA responds to the FCA’s proposals to introduce a price cap on the rent-to-own market

Published 23 November 2018

On 22nd November, the Financial Conduct Authority proposed to introduce a price cap on the rent-to-own (RTO) sector. This will come into force on 1st April 2019, subject to consultation.  Under the proposed cap, credit charges cannot be more than the cost of the product and RTO firms will also need to benchmark the cost of products against the prices charged by three other retailers. While the cap has been welcomed by a number of campaigners, we, at the CCTA, are concerned that this is yet another example of regulatory creep affecting the industry, with the potential for extreme consequences. The FCA is being drawn deeper and deeper into the realm of price controls. It was set up as a competition and conduct regulator, but it is rapidly becoming a price setter. In June 2018 during a Treasury Select Committee hearing, Andrew Bailey re-iterated the findings of the FCA’s recent HCC review. During the Committee, Bailey resisted calls for blanket rate caps. He also 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. During the hearing, Bailey also rejected demands to reconsider a cap on home credit. On alternative credit options, Bailey acknowledged that outside of Northern Ireland, Credit Unions are underdeveloped in the UK. Importantly, he said 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.  The decision to cap the rent to own sector is therefore surprising and we expect that this will lead to more calls for more caps on other sectors. Campaigners are clear what needs to happen — price controls to put rent-to-own lenders like BrightHouse out of business. But they are much less clear about what will fill the vacuum. Credit unions and social lenders are being proposed as solutions. But these are a drop in the ocean compared to the commercial businesses serving millions of customers day in, day out. The campaigners also know that, once a cap goes in, it becomes the FCA’s and the Government’s problem, not theirs. They are not on the hook when the supply dries up. Of course, the ones who really suffer are the consumers. They lose access and choice. And ironically life becomes more expensive for them because they lose their budget-smoothing mechanisms. Ultimately, the erosion of lenders will continue and access to consumer credit will be restricted by default. A result that is certainly not in the best interests of the consumer.   Greg Stevens CCTA CEO