Path to Success: an update on membership services

Published 24 October 2022

In the last edition of our magazine, I spoke about some exciting CCTA plans to further develop our services as a trade association. This edition presents a good opportunity for me to update our members. Both long-standing members and those who have joined us recently. In short, it has been a busy period for the CCTA team but our plans have progressed well. Last time, I spoke about CCTA introducing more workshops and guidance papers on key regulatory topics. Consumer Duty dominates our work As many of you will know, we delivered the first of those workshops in August. This covered the Consumer Duty and the key considerations for our members. It was a hugely successful workshop. It was attended by over 100 members and we received a lot of positive feedback. Following the workshop, we published our Consumer Duty Guidance Paper. This supported and guided our members in not only understanding the Duty but also the key implementation and operational considerations. We continued with in-depth discussions around the requirements and expectations of the Duty at our recent Autumn Summit. But our work on Consumer Duty does not stop there. We know it remains a key regulatory topic. Not just during the implementation phase, but for years to come. We are now working on delivering the next set of workshops and guidance papers. Before the end of the year, and going into early 2023, we will be covering key topics such as illegal money lending, online and social media financial promotions, commission disclosures, complaint handling and MI in light of the Consumer Duty and Statutory Debt Repayment Plan (SDRP) scheme, to name a few. In fact, members will have seen the recent release of our second guidance paper on the FCA’s improvements to the Appointed Representative (AR) regime. This is a must-read for our members who have or plan to have, appointed representatives. Similarly, we previously spoke about a review of all our core regulated and non-regulated agreements and statutory documents. A lot of members use these. Recognising the Consumer Duty, we have improved readability, layout, and accessibility. Key financial information, as well as terms and conditions, are clearer and aid consumer understanding. We are now at the latter stages of final review and approval and aim to release the new versions towards the end of the year. Plans for an online training platform for CCTA members We are starting discussions with some potential online training platforms and software providers. We previously mentioned our intentions to introduce training and CPD for our members. Although our discussions are at very early stages, we intend to launch compliance training as soon as practicable. Our plans are to make available training modules that will cover many of the key legal and regulatory topics in our sector. These include (but are not limited to) complaints, financial promotions, CONC, the Consumer Credit Act, treating customers fairly, vulnerable customers, anti-money laundering, anti-bribery, Consumer Duty, whistleblowing, data protection/GDPR and SM&CR. CCTA Planning for 2023 As we approach …

Up in the Air: When is it appropriate to lend to those with CCJs?

Published 24 October 2022

In the latest issue of CCTA Magazine, we asked Lex Jones of the Registry Trust to talk a little more about the importance of the work that they do on county court judgments (CCJs). The CCTA is a strong supporter of their Get Satisfaction campaign. It is vital to ensure judgments are kept up to date. When CCJs are satisfied it is important that there is a record. This should be a win-win for both the customer and lenders. Consumer Duty focuses on good outcomes. The Consumer Duty makes clear that a lender should deliver the best outcome for a customer. That includes making sure information is passed along about a CCJ. Looking into the future, surely this is a useful indication. Especially if the customer has corrected their position. Especially if they have taken steps to put things right. Surely this is an indication that they may be a suitable customer in the future. From a behavioural perspective, in terms of credit risk, a lender might view favourably someone who has not just let time run down on their CCJ. Should CCJs prevent future lending? However, this is only relevant if the regulator doesn’t close lending to those with CCJs. This was one of the issues that emerged from industry discussions held with CCTA members earlier in the year. It became a concern that the FCA seemed to be questioning whether it was right to lend to people who had CCJs. This was an issue that emerged from an informal conversation among members. We said at the time that we would pursue this further with the FCA. For us, the concern was that this looked like a misunderstanding of the nature of the market that many high-cost lenders serve. We believe that, especially in subprime, customers may well have had a CCJ. FCA provides clarification. In a statement that we were told we could share with the membership, we were assured that the FCA’s position is not that you cannot lend to a customer with a CCJ. They said to us, “A firm should have regard to any information of which it is aware of at the time the creditworthiness assessment is carried out that may indicate that the customer is in, has recently experienced, or is likely to experience, financial difficulties. The fact that a customer has a CCJ is likely to be relevant to this assessment.” Hopefully, that provides some assurance that there is no outright ban. They went on, “The extent and scope of the creditworthiness assessment, and the steps that the firm must take to satisfy the requirement that the assessment is a reasonable one, based on sufficient information, are dependent upon, and proportionate to, the individual circumstances of each case. The presence of a CCJ may be a factor suggesting that a more rigorous affordability assessment is necessary.” The quicker amongst you may realise that this is also not an endorsement of this lending. There is enough in that explanation, with a mention of …

Changing Track: What the new government means for the industry

Published 24 October 2022

Following Boris Johnson’s somewhat forced resignation in July, a new leadership contest for the Conservative Party took place over the summer. This meant a change of Prime Minister and a new Government. Truss emerges as Prime Minister. Liz Truss MP, winner of the leadership contest became Prime Minister shortly after. Truss, viewed as the favourite for most of the campaign, was elected as an MP in 2010 and has served as part of the Cabinet since 2014. Most recently holding the post of Foreign Secretary. Truss, recognised as being on the right of the Conservative Party, campaigned on a platform of the need to deliver economic growth and tax cuts. We have already started to see this action being taken as part of the mini-budget at the end of September, with the planned rise in National Insurance being reversed, and a series of tax cuts. A change in policy direction has also been coupled with changes to other major roles in government. Very few remain from the Johnson administration. This has been seen at HM Treasury with the appointment of Kwasi Kwarteng as Chancellor and a new ministerial team. The Treasury makes changes. The structure of the team has also been amended. Previously it was the Economic Secretary that held responsibility for financial services regulation, the FCA and access to affordable credit. These have now become the responsibility of the Financial Secretary. Andrew Griffith MP was appointed to this position on the 8th of September. Griffith is a relatively new MP, elected in 2019. Prior to this, he worked in private business for most of his career but not much is known yet about his stance on consumer credit. We have written to the new Minster to introduce the CCTA and the issues currently facing the alternative lending market. Aside from this, we continue to have regular meetings with policy officials at HM Treasury as these remain in post despite changes in government. Other government departments have also seen changes. At the time of writing, we are waiting for some responsibilities to filter through on issues we are concerned about such as small businesses and financial inclusion. These should become clear in the coming weeks. Access to Credit as over 1 million use illegal lenders Access to credit remains central to our messaging, particularly the role of commercial credit within the market. In recent times we have tried to draw political attention to the sharp reduction in the supply of regulated credit for consumers who are unable to access the ‘prime’ credit market. A report from the Centre for Social Justice (CSJ) in March found that over 1.1 million people are now having to use illegal lenders in England (up from the previous estimate of 300K). We believe there are now more people using loan sharks than regulated high-cost credit, something the Government should be concerned about. The FCA has played a part in the demise of regulated credit In the last three years, the FCA has presided over the …

Comment from Chief Executive Jason Wassell on the death of Queen Elizabeth II

Published 09 September 2022

Like so many, we are sad to hear of the passing of the Her Majesty The Queen. I know that I speak on behalf of CCTA members when I pay tribute to her loyal service to our country and her sense of duty. Our thoughts are with the Royal Family at this difficult time. We have seen six monarchs since we were founded in 1891, and we send our best wishes to King Charles III.

Mark Fiander announced as new Chair of the Consumer Credit Trade Association

Published 25 August 2022

Mark Fiander, CEO of Gain Credit LLC and Consumer Credit Trade Association (CCTA) Council member, has been appointed as the new Chair of the Association. He took up the position having been involved with the CCTA and related associations for several years. The role of the Chair is to provide strategic advice to the Chief Executive and lead the CCTA Council, which meets regularly throughout the year. Commenting on his appointment Mark Fiander, said: “I am delighted to take on this role at such a crucial time. With huge challenges facing UK consumers and new regulation, in particular the Consumer Duty, coming into force, it is vital that the credit industry has a strong, yet considered voice and that best practice is effectively shared. “The CCTA has been fulfilling these roles for well over a hundred years and I look forward to doing my part as it continues to strive to ensure responsible access to credit for all”.  Jason Wassell, Chief Executive of the CCTA said: “It is great news that Mark has accepted the invitation to be Chair of the CCTA. He is already an active member of our Council and has been involved for many years. “His experience includes various areas of financial services alongside an expert understanding of the alternative credit market, which will greatly help with our strategic activity. “I look forward to working with him during a time when credit is going to be more important than ever to those that need to carefully manage their finances”.  Mark Fiander biography Mark is CEO of Gain Credit LLC and an existing council member of the CCTA. He has previously worked across banking, money guidance, insurance and consumer goods.

PS22/9: A new Consumer Duty – CCTA initial response

Published 27 July 2022

It is interesting to see the Consumer Duty policy statement and final guidance out. We will be taking a few days to work through all the materials. For some of us, this has been the focus for many months, if not years of discussion. Of course, no one can disagree with the general principles and outcomes that we have arrived at and there were some good decisions about the scope or the right of action. Any non-handbook guidance is welcomed, and that has long been one of our appeals. An early thought from the CCTA, one consistent point we have been pushing throughout is that this can’t be the end of the consultation and discussion around the Duty of Care. If we have learned anything from the last few years of FCA principles-based regulation is that the real work starts now in working out what this means in practice. We have spent a year debating key sentences but now we need the next sentence, the next paragraph, and the next page. That can’t be just one-way. As I have already said, I value every word that the FCA provides. But this is about practical implementation and that needs firms to be involved to raise the questions and give their perspective. This needs to be the end of the beginning rather than the end of this process. We are happy to be part of that process. Jason Wassell CEO

CCTA Comment on FOS future funding discussion paper

Published 16 June 2022

On Tuesday the Financial Ombudsman Service (FOS) released its long-awaited discussion paper on its future funding model. For some time, we have been engaging with the FOS on its funding model and the burden it places on the alternative lending sector. We have been clear that the organisation needs a more sustainable model moving forward. We have seen a series of case fee rises in recent times and a reduction in the number of free cases which have all had an impact on firms, particularly medium and small businesses. This needs to be considered as part of the future model. This is an even worse position when you realise that the FOS has only got the figures to make some sense by dipping into its reserve funds. The paper contains some of the ideas we have already put to the FOS such as the need for Claims Management Companies (CMCs) to pay a fee to bring a case to the FOS to ensure a higher quality of claims. However, while we have forced them to consider this idea, I think it is clear that they are not overly keen. So, we will be working with other organisations to keep the pressure on. I am sure we will be discussing our views on the FOS’s suggestions within this paper at the upcoming Consumer Credit Trade Forum which brings together trade associations and the FOS senior leadership.

CCTA response to the Financial Ombudsman Service (FOS) final plans and budget for 2022/23

Published 30 March 2022

“We are disappointed that the FOS has decided to implement the proposals it consulted on earlier this year, despite the feedback it has received. “For some time, we have been talking about the financial pressure our members are under from the current fee structure of the FOS. “The free threshold has been reduced from 25 to just three cases. This will mean that around 20 per cent more firms will now have to pay case fees, which will disproportionately affect smaller businesses. That alone represents a cost of over £16,000 to a firm with 25 cases. “Today’s publication also means a large rise in the compulsory jurisdiction levy paid by firms will go ahead. “There remains little explanation of why the organisation’s cost base will rise by over £40 million for the coming year and is an example of the wider concerns we have had about the financial model of the FOS in recent years. “We need to look in more detail at how the FOS will be sustainably funded in the future. We will be discussing this with the FOS in the coming weeks to outline the industry’s position. We need to ensure the organisation delivers value for money for consumers and firms alike.”  

CCTA comment on CSJ report on tackling illegal money lending in England

Published 21 March 2022

We welcome this new report and this study into the scale of illegal money lending. Even before the current cost of living crisis, we have talked about the increasing problem of loan sharks and the real pain they cause to families across the UK. It is now estimated that over one million people are relying on illegal lenders. The CCTA has highlighted the sharp decline in the supply of regulated credit in recent years and what this will mean for a group of individuals that struggle to borrow elsewhere. While we agree that Credit Unions and other community schemes need support, experience shows they can’t fill the space left by commercial lenders leaving. Families need access to a blend of commercial and not-for-profit lenders providing financial products that meet their needs. Without this, there will be a growing number of these horror stories of illegal lending.

CCTA response to BNPL Consultation

Published 19 January 2022

HM Treasury’s consultation on Buy-Now Pay-Later (BNPL) products has recently closed. Here we share the main points from our response. These are key principles we believe HM Treasury needs to consider when shaping the future regulation of consumer credit. • HMT wants a proportionate regulatory regime for BNPL. However, BNPL is often used as a substitute for other credit products. It is important that there is consistent regulation – and consumer protection – for substitutable products. • Many credit products are already offered in a digital online environment. The online nature of a product does not necessitate a different or lighter-touch regulatory approach. Lenders have made digital products work for customers and firms under the current regulatory regime. • If the provisions of the Consumer Credit Act are not fit-for-purpose for one credit product, it is not fit for-purpose for any credit product. • The customer journey for any credit product needs to be structured in a way that ensures consumers have all the information they require, presented in a clear way, and opportunity to exit the process if they decide it is not the right product for them. • Comprehensive reporting of credit usage and repayment is vital – to protect customers and lenders. • Affordability checks must be required for BNPL in the same way as these checks are required for other credit products. No interest does not necessarily mean lower risk. A BNPL loan can be unaffordable, even if no interest is payable.

CCTA response to the Financial Ombudsman Service (FOS) plans and budget for 2022/23

Published 15 December 2021

“For some time, we have been talking about the financial pressure our members are under from the current fee structure of the FOS. We are disappointed by today’s announcement which includes a large rise in the compulsory jurisdiction levy paid by firms. “While we would welcome the freezing of the case fee after the successive rises of recent years, we are concerned about the reduction in the free cases threshold particularly when, all case fees, win or lose, are shouldered by the firm. “The free threshold has been reduced from 25 to just three cases. This will mean that around 20 per cent more firms will now have to pay case fees, which will disproportionately affect smaller businesses. That alone represents a cost of over £16,000 to a firm with 25 cases. “There is little explanation of why the organisation’s cost base will rise by over £40 million for the coming year and is an example of the wider concerns we have had about the financial model of the FOS in recent years. More needs to be done to ensure the Ombudsman delivers value for money”.  

What will the FCA’s ‘Consumer Duty’ mean for access to credit?

Published 24 November 2021

I spoke last week at an event exploring the FCA’s proposed ‘Consumer Duty’. The Duty is positioned as asking firms to put themselves in the shoes of the customer and consider if they would like to be treated how their firm treats customers. We are concerned that it is a much more radical change in the relationship between consumer and lender and that was my warning. The FCA says the purpose of the proposed Duty is to set clearer and higher expectations for firms’ standards of care towards consumers. These are principles that no one can really disagree with-better product design, value for money, improved communication. They are what we should all strive to do, what we want to deliver. But as an industry, we are concerned about the responsibility the Duty will place on firms that are already struggling. With the next consultation paper, which will include the draft rules, due from the FCA before the end of this year, it’s time to think about the possible unintended consequences for consumers. We have already seen a drop in the supply of credit to many customers. Big companies have left the alternative lending market in recent months, but more worryingly – existing lenders will need to consider what the Duty means for their future. They may want to move away from areas of lending that are at the greatest risk of being challenged under the Duty. Not because they are doing anything wrong, but because future interpretation of their current actions are uncertain. History shows that interpretations of FCA principles shift. And a shift in future interpretation may lay lenders open to possible challenge, back-book review, and retrospective compensation. We worry this will mean access to credit and financial inclusion, will drop further as lenders consider these risks. The principles and indeed the regulation haven’t really altered for years across areas like affordability. However, the supervisors or adjudicators’ interpretation has shifted over the years. We know from our work with our members, that there are decisions taken on a daily basis about what should be included in affordability assessments, levels of verification, permissible data types, definitions of sustainability, the use of third-party tools and many other unwritten rules. Now there is an argument that this is what principles-based regulation is all about. Regulation can adapt to new risks and threats without having to be redrafted. However, this brings new risks of policy being created in isolation behind closed doors; not utilising the best version of the arguments and without reference to other policy objectives (e.g. competition). It is also the retrospective application that seems so unfair. Lenders are happy to adapt, to listen to the regulator and to their customers. Then being asked to apply today’s interpretation on lending that dates back a decade brings additional risks. We all want to see greater protection for consumers, but in creating a duty on the lender it marks a radical shift in responsibility. It lands the risk almost completely on the lender …