Landslide to Landslip

Published 12 June 2017

Strong and stable has not been delivered by the Conservatives, but unsteady and unstable has. At a time when business in all sectors needs a steadying influence as we approach BREXIT, politicians of all hues need to do the right thing, rather than choose political expediency. CCTA will be working with all Parties to ensure that our Members voice is heard, and that any potential detriment caused by inappropriate political action is brought to their immediate attention. The next two years are going to be critical to business and the CCTA Public Affairs and Regulatory programme has been significantly increased to ensure our voice is strong and consistent.

Choppy Political Waters Ahead for the Credit Industry

Published 31 May 2017

In the first of our new CCTA Podcasts, I talk politics with two Westminster heavyweights — The Spectator magazine’s Political Editor, James Forsyth, and former special adviser to both Tony Blair and Peter Mandelson, Patrick Diamond. With only a week to go until polling day, James and Patrick are largely in agreement on the effectiveness of the parties’ campaigns thus far — unexpected progress for Jeremy Corbyn despite repeated gaffes over the cost of spending commitments; and major strategic mistakes by Theresa May that have undermined her reputation for leadership.  Despite these, Patrick and James still expect a solid Conservative majority come 9 June, though nowhere near the landslide numbers suggested by early polling. On business and the economy, they identify competing pressures: Theresa May’s more Christian Democrat inclinations on the one hand, which favour a bigger state and more intervention in markets, and the harsh realities of Brexit on the other, which will structurally shift British politics to the Right and necessitate lower taxes and less regulation. On credit and banking, James strikes a gloomy note and sees a clear political appetite for price capping in credit, banking and utility markets (and no political price for doing so).  Conversely, Patrick is less sure about the inevitability of further capping and suggests waiting to see who becomes Chancellor. Next month, we review the election outcome and look in more detail at what the next five years will hold for the credit industry. Click the ‘play’ button on the media player below and enjoy! Greg Stevens CCTA Chief Executive

Need for Responsible Credit Grows Dramatically in FCA Authorisation era 

Published 31 May 2017

The need for responsible, fair and transparent short-term credit could be at its greatest ever, as household debt looks set to increase to £15,000 by 2020. Such an increase would mean that access to responsible credit from FCA regulated companies would be essential for many hard-working individuals and families that are just about managing from month to month. The research, conducted by the TUC, is based on the most recent data from the Office for National Statistics and the Office for Budget Responsibility. It states unsecured debt per household is set to reach a record high of £13,900 this year, rising from £13,200 last year and reports wages in the UK are still worth around £20 per week less than before the financial crisis. This recent publication further contributes to previous reports documenting the six million ‘just about managing’ UK households, a phrase now widely used across parliament, think tanks and the press to describe those working households who are just getting by to pay their bills but are left with no disposable income. Greg Stevens, CCTA Chief Executive says: “The volume of individuals who consider themselves to be ‘just about managing’ each month is on the rise and as a result, short-term credit providers are filling the void.” In a survey by comparison site, Money.co.uk in January 2017 of 1,000 households with children, 60% of respondents classed themselves as ‘just managing, with 44% stating they regularly ran out of money mid-way through the month. Mr Stevens continues: “These figures demonstrate that the availability of responsible credit from FCA approved firms has never been of greater importance. 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.” In recent months the Bank of England, MPs and charities have also warned of high consumer debt levels, pointing to increases in bank lending, car leasing companies, credit card firms and shops offering interest free-credit.

CCTA Taking the Fight to the Politicians

Published 30 May 2017

At a time of major change in both national politics and amongst the trade bodies representing the credit industry, it is essential that businesses have an association capable of fighting their corner in Westminster.  Hence, CCTA is raising its game and doing much more to engage politicians and opinion-formers on behalf of members during the new Parliament from 9 June. CCTA has a long and illustrious history dating back to 1891.  Most of the other trade bodies representing different bits of the industry trace their origins back to the CCTA in some way or other.  One of our achievements down the years has been to keep the regulators honest, and to ensure that they have a clear understanding of how their rules and regulations impact on our businesses and the customers you serve. In recent years, CCTA has been at the heart of the major regulatory change affecting the credit industry, namely the shift from OFT to FCA and the accompanying need to receive ‘authorisation’.  We have become trusted interlocutors of the FCA, FOS, ICO and others.  We don’t always see eye to eye with them, but we have their ear and we’re listened to. Graham Haxton-Bernard and I will continue to beat a regular path down to Canary Wharf to keep the regulator at bay, but we are also adding an important new string to our bow, as well. It is certainly true that our regulators have unprecedented powers to intervene in the market, but it is the politicians who set the climate of opinion in which the regulators operate, and ultimately government ministers who issue the instructions. These actors need man-marking as well.  Therefore, we are committing extra resource to ‘upping’ our lobbying efforts in order to influence thinking further upstream, before things reach the regulator. This is important for a number of reasons.  For one, politicians who understand the benefits of deep and fluid credit markets will be less prone to knee-jerk responses, and less likely to have their chain pulled by debt campaigners with political agendas (usually to shut the credit industry down).  Secondly, they will understand the positive difference we make to consumers’ lives up and down the country: people who use our products to smooth lumpy payments and remain economically and socially active.  They might also grasp the contribution this makes to the UK economy. But thirdly, and most importantly, our aim is to make sure the politicians understand the need for ‘proportionality’ and caution when regulating if they want to maintain a diverse and dynamic credit market with a mixed eco-system of large and small businesses serving particular consumer needs.  Big regulation works for big banks and finance houses; it crushes SMEs. We will be taking the fight to the politicians in lots of ways.  We will be seeking out meetings with ministers and officials in the lead Whitehall departments.  We will be holding events and briefings in Parliament for MPs, Lords and committees that take a close interest in the industry.  We …

Thatcher is Dead! Long Live the State!

Published 18 May 2017

WHAT TODAY’S CONSERVATIVE MANIFESTO MEANS FOR THE CREDIT INDUSTRY The result of the election seems a foregone conclusion. But manifestos are important nonetheless, not only for the specific policy commitments they contain, but as indicators of the tone and nature of the political debate to come over the next 5 years. For us in the credit industry, there are also important signposts of what we can expect in terms of regulation and political pressure on our businesses. So what does it say that’s relevant? It has two overarching themes – strong leadership in the Brexit negotiations to get the best deal for Britain; and, on the domestic front, using the power of government to tackle social injustice and create a ‘Great Meritocracy’ where everyone can succeed based on merit. This second point is remarkable. Theresa May’s version of ‘One Nation Conservatism’ heralds an historic, ideological departure from the central tenets of ‘Thatcherism’ — something no Conservative leader since Thatcher has been inclined or dared to do, not even David Cameron during his mission to modernise and ‘decontaminate’ the Tory brand. Mrs. May states she ‘rejects the ideological templates provided by the socialist left and the libertarian right and instead embraces the mainstream view that recognises the good that government can do’. Expect meters of column inches on this topic. Team May has talked for months about the ‘Just About Managing’ and the manifesto certainly doesn’t disappoint. Many of the policy prescriptions are written specifically for them: ‘an industrial strategy to spread opportunity across the whole UK’, ‘a higher national living wage and rights and protections at work’, investment in the NHS, schools, social care, and so on. All geared to giving JAMs better life chances and greater ‘economic security’. Further into the document we get to the parts of direct relevance to credit businesses, and there are several items of note. Under ‘Cutting the Cost of Living’, the Conservatives commit to “making consumer markets work more fairly, and in doing so reducing the cost of the essentials that families have no choice but to buy”. Importantly, it then adds that “these costs make up a much larger share of working class household budgets than those of better-off households.” This is highly significant. ‘The poor pay more’ has long been a mantra of the Left, but historically a step too far for the Right. No longer. If Conservative governments were once greeted with relief by the credit industry and other sectors, they won’t be anymore. The next section, ‘Fair Markets for Consumers’, builds on the theme: “Poor information, complex pricing and exploitative behaviour prevents markets operating efficiently for the benefit of all … Since 2010, we have capped the cost of credit for expensive payday lenders … We will now go further to reform markets in the interests of consumers and reduce the cost of living.” This too presages further intervention in credit markets. The document goes further, promising more power for the FCA and FOS: “A Conservative government will strengthen …

Leaked Labour Manifesto – implications for the credit industry

Published 11 May 2017

A draft copy of the Labour party’s election manifesto was leaked to three national newspapers last night. Leaving aside who might be responsible, what their motivations might have been and what it says about the state of the Labour Party, it gives us a very good idea what our industry can expect if Jeremy Corbyn should will power on 8 June. Now, there are lots of big ‘ifs’ in life but that must be one of the biggest.  You might think Russia has more chance of winning Eurovision than Labour the election and, to be frank, you would be right.  But the manifesto is still important for credit businesses because it gives us a clear indication of where an influential school of national political thought will be coming from during the next Parliament. The document is long and detailed: 46 dense pages of very prescriptive policy. It seems unlikely that there will be wholesale changes between now and the expected official publication date next week.  So what we have seen is what we will get; and we can expect its contents to form Labour party policy from 9 June onwards, if Jeremy Corbyn aims as Labour leader (another big ‘if’ and a discussion I won’t go into here). The overall headline is it’s fast forward to 1983.  In tone and content, the similarities with Michael Foot’s ‘longest suicide note in history’ are striking.  The media has tended to lead with Trident and the nuclear deterrent. This is a particularly excruciating policy conundrum for the Leader and his parliamentary party and the manifesto doesn’t disappoint.  The document Labour supports “the renewal of the Trident submarine system”, but adds that “any prime minister should be extremely cautious about ordering the use of weapons of mass destruction”.  I’ve yet to meet one who has been cavalier about it. Surprisingly, it doesn’t mention the credit industry once. From my discussions with parliamentarians shortly after the election was announced, I concluded there was a very good chance we could see commitments to further price controls in the retail credit market.  Senior Labour moderate, Rachel Reeves, had held a Commons debate on overdraft charges days before the election announcement and her call for a statutory cap on charges had been well supported by her Labour colleagues.  On top of that, Corbyn’s predecessor as Leader, Ed Miliband, has continued to campaign for caps in the rent-to-own market and it was a fair assumption that that would be adopted by the Corbyn camp. So further rate caps are conspicuous by their absence, in our view. One explanation is the closeness to the issue of Stella Creasy, who is not well liked by Corbyn’s extra-parliamentary outriders in Momentum.  With talk of 100 Labour MPs forming a breakaway ‘Progressive’ group within Parliament, it is possible the Leadership did not want to lend credence to a leading progressive light. However, it would be a mistake to interpret the absence of caps as a free run for the industry.  Far from it.  Risk based pricing (interpreted as the ‘the …