CCTA endorses Provident Financial Consumer Credit Division Authorisation by the FCA

Published 12 November 2018

We are pleased to note that the Financial Conduct Authority (FCA) has informed Provident Financial plc that its Home Credit and Satsuma businesses have been fully authorised. In a statement published on the firm’s website, Malcolm Le May, Chief Executive Officer of Provident Financial plc said: “This is excellent news for our customers and testament to the improvements achieved in Home Credit during the past year from an operational and regulatory perspective. Under new leadership, Home Credit has successfully implemented a new operating model, delivering improved oversight and control over field activity and customer outcomes. “Authorisation would not have been achieved without the hard work of Chris Gillespie, MD Consumer Credit Division, his senior leadership team and all their colleagues who at head office and in the field embraced change resulting in better outcomes for customers. “Home Credit, Satsuma and the rest of the group will continue to work in partnership with the FCA to ensure we have viable businesses operating to the highest regulatory standards in the sector. Now that the authorisation process is concluded, the business intends to progress discussions with the FCA regarding the implementation of enhanced performance management of its Customer Experience Managers based upon a balanced scorecard approach and some element of variable related pay. “I look forward to continue working with Chris and his team as we develop and grow Home Credit and Satsuma, so not only will we be the biggest provider of home credit in the market, but also the best for customer outcomes and service.” 12th November 2018

Data brokers and credit scorers accused of GDPR breaches

Published 11 November 2018

European regulators have been asked to investigate several data brokers, credit rating agencies and adtech companies to see if they are breaching the EU’s new data protection laws. Privacy International, the campaign group, filed a series of complaints to the British, Irish and French data regulators on Thursday against data broker Acxiom, software giant Oracle, credit rating agencies Experian and Equifax and adtech companies Criteo, Quantcast and Tapad. The campaign group claims that the businesses, which buy and sell the data of millions of online consumers, do not have a legal basis to amass such information.  “Part of their business models are about fundamentally exploiting data and therefore clash with many of the provisions [of the EU’s General Data Protection Regulation],” said Ailidh Callander, legal officer at Privacy International.  “We put most of our attention on the bigger companies with which people have a direct relationship, like Facebook and Google, but then there are these other companies that most people have never heard of, and wouldn’t expect to have a huge amount of data about us.” Facebook and Google have already faced complaints under GDPR and attracted unprecedented criticism for their approaches to data privacy following the Cambridge Analytica scandal.  Google was also caught up in controversy last month after it emerged that the company had withheld details about a leak of user data after a staffer argued that publicising the leak could cause political problems for the company. But the latest complaints from Privacy International highlight growing concern about a little-known ecosystem of data brokers, adtech companies and credit rating businesses that have also built business models around buying and selling data online. Private web browser Brave filed a similar complaint last month with the UK data regulator and the Irish data protection watchdog against Google and the adtech industry. Ms Callander said the data collection practices of such companies fell foul of GDPR’s principles of transparency, “data minimisation” and purpose limitation. The companies argue they anonymise data and obtain individuals’ consent for using their information, but Privacy International said that by amalgamating large amounts of anonymous or “pseudonymous” information, the businesses were able to infer sensitive facts such as political affiliation, religious beliefs and ethnicity. Criteo said the company had a “proven record of ensuring [its] technology has high levels of data privacy and security” and had “complete confidence” in its practices under GDPR. Acxiom said it participated in data security and privacy tests led by industry bodies and had a 50-year history “leading the ethical use of data and technology to deliver more relevant marketing and better consumer experiences from respected brands”. Experian said it would review the allegations: “We have worked hard to ensure that we are compliant with GDPR and we continue to believe that our services meet its requirements.” Equifax, Quantcast and Oracle declined to comment. Tapad did not respond to a request for comment. The UK’s Information Commissioner’s Office said it was “aware of concerns raised about the compliance of data protection laws by big …

Why the launch of yet another anti-consumer credit campaign could have dire consequences for the customer

Published 26 October 2018

Yesterday, I was fortunate to be able to represent the views of our members and industry on the BBC Radio 4 You & Yours programme which can be heard here. The 8 minute segment referred to the launch of the Debt Hacker campaign and gave its founder, Alan Campbell the opportunity to lay out his stall regarding Debt Hacker, and his desire to bring an end to high cost credit. While the campaign intentions are to be applauded, there is a danger that the direct submission of mass complaints to FOS, regardless of whether they are genuine or not, will have an adverse effect on the sector as lenders will opt to leave the market leaving the customer with reduced availability to consumer credit. The demise of Wonga has prompted the campaigners to focus on other lenders by taking the view that “if just 100,000 people complain to the FOS about how they are treated, it would cost the payday lenders £55m alone, win or lose”[1] and the Debt Hacker website tool allows customers to complain directly and therefore without the assistance of a CMC and their associated fees. This is a great tool for the submission of genuine complaints but the cost of deluge of false complaints will still render many small lenders inoperable and effectively close down the sector by default. Whilst government and the FCA remain prostrate because of Brexit, consumer activists in consumer credit are having relatively free rein to concoct their storylines and spin, and the customers requiring access to responsible credit could become the unintended casualty. Greg Stevens Chief Executive   [1] https://www.ft.com/content/5ce95d2c-ae9c-11e8-8d14-6f049d06439c  

CCTA responds to the ‘Dear CEO’ letter issued to payday lenders by the Financial Conduct Authority

Published 17 October 2018

The FCA has published a ‘Dear CEO’ letter issued to all payday lenders regarding the issues surrounding the increase in complaints about unaffordable lending and how the FCA expect firms to firms to manage the impact.  Lenders have been requested to assess their lending activity to determine whether creditworthiness assessments are compliant and inform the FCA if they are unable (now or in the future) to meet their financial commitments because of any remediation costs. The Dear CEO letter refers to four recent decisions made by the Financial Ombudsman Service involving individual complaints about payday loans which illustrate the FCA’s concerns and that these cases should be used by lenders when determining their own complaint handling procedures. The CCTA is concerned that this latest stroke only serves to add to the ‘ regulatory creep ‘  which is already concerning members and industry alike. FOS is acting like a regulator while the regulator acts like a consumer activist, but neither are looking through the lens of natural justice and reality. Impartiality and fair play to both the consumer and business in parts seems to have disappeared out of the back door. The Wonga collapse could be repeated elsewhere, and the continuing fraudulent consumer behaviour promoted by the current rise in litigious thinking could bring about a dramatic loss of access to responsible lending to higher risk clients. With all the indicators pointing to the lower paid already struggling, and people between jobs, with broken relationships, or a blip in their life having to use the ill-fated Universal Credit, there will be fewer financial lifelines available.  The Banks have already increased their cut off rates, so less people will be able to borrow, and the BoE last week was looking for even more credit risk aversion. The danger is that the distance between ‘the haves’ and ‘the have nots’ will become greater at a time when the UK could be going into Brexit recession. We must take action now to prevent an access to credit drought that will affect society and the economy today, and for our future generations.  

CCTA’s thoughts on current claims management activity and the impact it is having on the industry

Published 05 September 2018

The recent news that payday loan company, Wonga, has sought a £10million bailout is an ominous reminder of the challenges currently facing the consumer credit industry as regulators, consumer groups, and claims management companies focus their attentions on high cost short term credit providers. The latest document to come from the Financial Conduct Authority details the regulators’ Creditworthiness Policy Statement and while it does promisingly recognise the need to keep the regulations proportionate, the approach may come as too little, too late for some lenders. Over-regulation presents its own challenges, but many in the consumer credit industry are experiencing the same issues faced by Wonga, as they are having to deal with a significant spike in claims being directed towards the Financial Ombudsman Service, driven principally by claims management company activity. While many cases may be genuine, the credit industry’s chief bugbear is the behaviour of sham Claims Management Companies (CMCs) that are using industrialised processes to send thousands of bogus compensation claims into FOS.  They use pro forma, template complaints letters, without conducting any due diligence or fact-checking in advance. It is alleged in many instances, that consumers will not even know a claim is being made on their behalf. Such disingenuous behaviour is clearly not limited to the credit industry as the Solicitors Regulation Authority updated its warning notice on 9th August 2018[1] with advice to law firms who act in personal injury cases, particularly holiday sickness claims.  The notice, which sets out the expected standards, notes the SRA are investigating firms involved in holiday claims, with potentially improper links with claims management companies. They are also seeing firms pursuing claims without the proper instructions of claimants. Failure to complete due diligence may explain why the proportion of claims brought against credit companies by CMCs rose from 9% in 2016/17 to 22% in 2017/18. Anecdotally, those numbers will spike even more alarmingly this year as the window for PPI claims starts to close and CMC’s are turning their attention to other avenues of opportunity such as payday loans.  The recent comments by Wonga[2] that the company has seen an increase in claims relating to legacy loans is echoed by many but is a particular blow to some SME credit businesses as every single complaint taken on by FOS costs an SME business £550 regardless of whether the claim is legitimate or not.  Consequently it is important that the industry has confidence that the regulator can and does identify any malign activities of the claims management industry who send thousands of vexatious complaints to an over-stretched Ombudsman in the hope that they won’t be rooted out. The need for trust in FOS is doubly important because it is being given new powers as it extends its remit to handling complaints from larger SMEs in the aftermath of banking scandals such as RBS / GRG and interest rate swaps. Likewise, on 1st April 2019, the FCA becomes the regulator for all CMC’s . We await the results of this with …

CCTA responds to the announcement Wonga has stopped taking loan applications

Published 30 August 2018

The following is the CCTA view on access to credit and the impact of aggressive regulation,  and over zealous and sometimes vexatious redress claims made by the Claims Management Companies. These and other factors are the cause of the ongoing operating problems being experienced by Wonga. Access to responsible credit is required by the majority of consumers, to address short and longer term needs. As is much publicised the just about managing ( JAM’s ) consumers exist in most socio economic groups, with many families making ends meet until there is a crisis that needs a financial fix. Unauthorised bank overdrafts cost more than many high cost credit loans, so short term credit products like Wonga provided the financial breathing space consumers required. A strong consumer lobby and political muscle produced severe FCA regulation that collapsed the business model for certain short term loan products – but not unauthorised Bank overdrafts. Added to this Claims Management Companies leapt on the back of the change in regulation and targeted short term lending as a potential area for mass claims based on affordability issues. The Industry is currently coping with a dual problem of excessive vexatious claims and the FOS acting as a regulator, rather than an impartial ombudsman service. If the current scenario is allowed to continue consumers will be forced to find different routes to obtain financial assistance which may include the usage of illegal lenders, with the potential threat that comes with it. More than likely friends & family will be used, which is the fastest growing sector for access to credit. Borrowing from friends & family brings with it a degree of psychological pressure and potential family breakdown. Politically there is little if no capital for politicians to suggest that a price for risk model works well for the consumer and business.

CCTA responds to FCA Creditworthiness Policy Statement

Published 01 August 2018

Exchanges between the regulator and SME lenders can sound like a stuck record at times, with lenders complaining the FCA is over-regulating and forcing them out of business. However, this time we’re very happy to applaud the FCA for recognising the need to keep the regulations proportionate. The level of fact-finding and future scenario-modelling for a personal loan of £500 cannot be the same as for a loan of £500,000. The costs of the fact-finding alone would dwarf the size of the actual loan. Hence, the FCA needs to strike a balance if it wants specialist SME lenders to stay in the market and non-prime consumers to be able to access specialist loans designed around their particular needs. The devil is in the detail, of course, and lenders will need to look at the technical changes being made to the FCA Rulebook. But, on the basis of what we’ve read so far, we’re encouraged the FCA sees a role for our sector in the credit marketplace and recognises the need to keep the level of regulation at a manageable level.

CCTA comments on Treasury Select Committee’s Household Finances Report

Published 26 July 2018

Greg Stevens, Chief Executive of the CCTA, said: “We welcome the Treasury Select Committee’s recognition that credit plays an ‘essential’ role in many people’s lives, and has been critical in helping households weather the financial crisis and the aftermath.   “Nonetheless, we are concerned with the Committee’s calls for the FCA to consider wider caps on credit, which will be both counterproductive and harm consumers. This conclusion appears to be based on evidence that the high-cost short-term price cap was almost exclusively beneficial to consumers, and that there was no trade-off between regulating these products and denying access to credit for those who need it.   “But there is clear evidence that this is not the case. FCA statistics show there was a doubling in borrowing from home credit and rent-to-own businesses in the two years following the introduction of the payday cap. The cap forced consumers into other products that were available to them, rather than surviving without this essential line of financial support.   “The Treasury estimates there are 300,000 people using illegal lenders and others put the number much higher. The FCA says 3.1 million are borrowing from ‘friends and family’, for many a euphemism for illegal lenders. The lesson is clear: cap legal sources and borrowers find second choices — these might be regulated, equally they might not.   “A cautious approach is needed, and while they may look great on paper, they are counterproductive in practice — and will cause more consumer harm.”

The FOS review was only skin deep. It doesn’t tackle the concerns of SMEs

Published 18 July 2018

Richard Lloyd’s review of the FOS does not go far enough. There are crucial omissions that need to be addressed before trust in FOS can be rebuilt, argues Greg Stevens. This afternoon, the fearsome Treasury Select Committee will meet to discuss criticisms of the Financial Ombudsman Service (FOS). The criticisms were first revealed in a Channel 4 Dispatches programme in March. The programme makers used secret filming to reveal serious shortcomings in the way FOS trains its staff and adjudicates on consumer complaints about financial services companies. FOS strenuously denied that the findings were representative of its usual practices. But under pressure from the Treasury Committee chair, Nicky Morgan MP, it agreed to an independent FOS review. Former Which? Chief executive, Richard Lloyd, was duly appointed as reviewer. Nicky Morgan insisted both Lloyd and FOS should appear before her committee within three months. FOS review is lenient Reading Richard Lloyd’s report and re-watching the programme, it is hard not to conclude that the reviewer has been lenient. The soft language of the report contrasts sharply with harsh criticisms in the programme transcript. At one point a senior Manager says “We rushed through complicated financial issues and processes. I often didn’t know what I was doing.” Another says “I’m not proud to admit it but I’ve done it myself – just taken a chance and just slung stuff through, with any old decision.” The transcript reveals a similarly dire picture with regard to staff training. One mentor says “Some people have been thrown in with no training at all.” A trainer responds “There were people there who had no idea, no idea about any products, anything, anything about complaints at all.” But while the reviewer might have gone in lightly, his report does recommend reform to pretty much every area of the FOS — from its casework handling, to staff training, quality assurance, management capability, culture and morale, governance, etc. It is hard to think of an area that is not singled out for reform. FOS review: trust of consumers is essential There is no question that the FOS is an essential part of the regulatory architecture for financial services. It is vital that consumers should have recourse to a free, fair and speedy redress process. It is also undeniable that the FOS has experienced unprecedented organisational pressures as a result of PPI. But, equally, it is essential that the FOS and its decisions should command the trust of both consumers and the financial services companies being complained about. Unless its decisions can be deemed to be fair, trust evaporates. In view of this, Richard Lloyd’s FOS review does not go far enough. There are crucial omissions that need to be addressed before trust in FOS can be rebuilt. The credit industry’s chief bugbear is the behaviour of sham Claims Management Companies (CMCs) that are using industrialised processes to send thousands of bogus compensation claims into FOS. They use pro forma, template complaints letters without conducting any due diligence or fact-checking …

CCTA commentary on the report of the independent review of the Financial Ombudsman Service

Published 12 July 2018

The findings of Richard Lloyd’s report are helpful as far they go, but a more comprehensive review is needed. The credit industry will recognise the shortcomings his report identifies, just as they recognised the criticisms revealed in the Dispatches Programme — primarily the lack of staff expertise and inconsistency in decision-making.   FOS is clearly under organisational pressure from the volume of PPI mis-selling claims it has to handle, but that’s of little comfort to credit and other financial services businesses who suffer as a result.   The most important finding is the call for ‘a new strategic plan’ covering pretty much every part of the organisation. Our clear view is that the production of the new plan should be a preceded by a root and branch review of FOS by the National Audit Office. There hasn’t been one for 8 years and the complaints and claims industry has changed beyond recognition.   Richard Lloyd looked into a narrow subset of issues related to a 30-minute documentary. There is a much longer list of grievances that need closer attention. Chief among these are the malign activities of the claims management industry that send thousands of vexatious complaints at an over-stretched Ombudsman in the knowledge that they won’t be rooted out. Greg Stevens CEO CCTA 12th July 2018

How far are the services of Post Office outlets providing a satisfactory experience for the bank branch customer?

Published 12 July 2018

In the past 25 years, the UK has seen the closure of nearly 10,000 bank branches – over half of all branches – as more and more customers gravitate towards online banking in a tech-savvy world of contactless cards and virtual cheque payments. Having said that, there are still many customers, particularly the elderly, who prefer a face-to-face service and the chance to talk to people; to get financial advice, to access their money physically, and to have the security of seeing their bank transaction being processed. Consequently when a bank closure occurs, especially if this is in a rural location, members of the community may struggle. So, it is important that the replacement Post Office service provides the same level of service and products as those offered by the departing bank. According to the consumer group, Which?, there are about 60 bank branches closing every month. This means that 2,868 branches will have closed between 2015 and the end of 2018, with the number accelerating this year.  Banks are eager to substitute the face-to-face relationship with a range of digital on-the-go capabilities. (Business Insider previously reporting that from 2012 to 2017 consumer usage of banking apps had massively increased to 356%.) When the banks have come under fire for the closures, they cite low customer numbers and commercial loss as major contributing factors to the closures, choosing instead to offer day-to-day banking services through 11,500 Post Office branches. RBS has been heavily criticised for its closure programme in Scotland but boss, Ross McEwan, has remarked that the Post Office network is the “best solution to community banking.” But post offices premises can often be unsuitably located in shops and newsagents. Unite recognised this recently proclaiming;”Post offices are closing at an alarming rate or being relocated in the back of a shop with a much reduced counter service which is not equipped to deal with the volumes of business cash or the community’s banking needs”. A lack of a visible presence on the high street also means many customers, especially SME’s, may be unaware that the post office provides a banking service. As a consequence of this an Action Plan was launched in 2018 by the finance industry and the Post Office to raise awareness of banking services available at Post Office branches amongst local communities with lower bank branch coverage.  The five point plan had been devised following a request from John Glen, Economic Secretary to raise the limited awareness of the banking services available at Post Offices. The Minister had previously attended a Backbench Business Committee debate to hear MP’s describe the effect of community bank closures on their constituencies.  During the debate MP’s noted that the Post Office provides a valuable service but, “its ongoing restructuring process has seen too many branches close in recent years and we do not know what the future holds”. The Post Office is also limited by its maximum cash deposit limit of £2,000 which could prove restrictive for local business. Open …

CCTA welcomes recognition from FCA of the positives of home credit

Published 14 June 2018

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