FCA roundtable on Consumer Duty implementation

Published 28 February 2023

This note is a readout from a meeting we recently attended with the FCA. This will interest CCTA members who are involved in Consumer Duty implementation. INTRODUCTION As part of our policy and advocacy work, we attend the FCA’s regular roundtable meetings on Consumer Duty. These meetings, which are held specifically for Trade Associations, are a chance for the FCA to provide further detail. They could also provide insight into their expectations of firms with respect to Consumer Duty. This is an opportunity for us to put forward key questions and challenges that our members face in implementing the requirements of the duty. I attended the latest roundtable, which was held virtually, on 23rd February.  The meeting focused on the FCA’s recent review of implementation plans. They also talked about their communication and engagement activity and an update from the Financial Ombudsman Service. IMPLEMENTATION PLAN REVIEW The FCA provided an overview of their findings from the review of implementation plans for larger firms. Their findings were published on 25th January on their website. The overview they provided was effectively a summary of their published findings, where they found evidence of both good practices and areas for improvement in areas. This included Governance and oversight, Culture and people, Deliverability, Third parties, the Four Outcomes and Data strategies. They also re-iterated that where firms are falling behind on their consumer duty implementation plans, they expect firms to ensure they are continuing to focus on prioritising areas of greatest impact on consumer outcomes. Firms need to make changes to ensure consumers receive communications they understand. As well as products and services that meet their needs. They pointed out the need to work with other firms in the distribution chain to ensure all parties are delivering good outcomes. Whilst this review focused on larger firms, it is important to inform our members that the FCA will shortly be sending out a survey for smaller firms. This will be focused on their implementation plans. This is likely to be sent out “in the next couple of weeks” and will ask firms to provide responses to questions about their implementation journey. COMMUNICATION AND ENGAGEMENT The FCA was keen to highlight the work they have done with respect to industry-wide communication and engagement. They pointed to the progress made here and made reference to their Consumer Duty webpage for firms. This included sectorial webinars, and a series of podcasts focusing on each consumer outcome. As well as their sector-specific portfolio letters. It was good to hear that the communication and engagement activity will continue. They will be continuing engagement with trade associations and wider stakeholders and producing more webinars and podcasts. Two important areas for our members are that the FCA has advised they aim to issue guidance communications around the April deadline for the exchange of information between manufacturers and the distribution chain. FINANCIAL OMBUDSMAN SERVICE Richard West, the Director of Casework Policy at FOS. gave a short update. He was keen to highlight that they are …

‘The Future of Credit’ research – comments by CCTA CEO

Published 22 February 2023

Nice to be invited to the Finance and Leasing Associations dinner tomorrow, always a remarkable event. More important than the invitation to dinner is the strong collaboration between credit associations on issues that are of importance to our members. One of the common areas of work is the promotion of the value of credit to UK families and businesses. So, I was pleased to see the work being carried out by the FLA on the use of credit and especially the future of credit. I recently took part in the launch of some of their research entitled The Future of Credit. For those involved in this world, much of what it says rings a bell in terms of why people perceive, choose, and use credit. It was good to hear about what consumers want to see in the future of credit. Once again there are some familiar themes – greater personalisation, flexibility, control, and education. The research showed that most people feel that credit is working, but they could identify areas where it could be improved. There was a call for a deeper relationship with more engagement and deeper contacts, and it should be less transactional about applications and payments. That raises some interesting questions about whether a longer-term deeper relationship would be seen by the regulator as building a dependency rather than improving service. Credit is part of everyone’s lives. I also wonder whether some of these experiences and views may alter depending on your circumstances. For some, there are many products available. Others have fewer options. I believe that will mean that the relationship with credit may be very different. Lots to discuss. I know that the FLA is continuing to do more with this research, and I think it is an area where trade associations can work together.

CCTA Chief Executive announced as Credit Week Leadership Awards finalist

Published 14 February 2023

I am very pleased to hear that I have been shortlisted for Business Leader of the Year in Alternative Finance award held during Credit Week. These are always interesting awards reflecting credit leadership across a range of sectors. Organised by Credit Strategy every year we watch our members do well across the sectors. Every year we post our congratulations to others in the days after. It was a pleasant surprise when asked if I was happy for my name to go forward and to be a finalist is just the cherry on top. It is all about the great team at the CCTA. Up against some great other leaders, we are so happy that we have received this recognition. This seems like a good opportunity to say how I work with a great team that keeps the CCTA moving. Our small team are specialists in their function areas – across policy, membership and communication. Campaigning hard for our members, providing our members with advice and building a network of lenders, brokers and associates. More than that, the team are willing and able to step in and help each other. Of course, the CCTA would be nothing without volunteers who serve on our Council, giving up their time to help direct the organisation. We are also helped by a small band of members who take part in our discussions. They are willing to share their experiences and insights. It is that knowledge and experience that allows us to bring focus to our work. Credit leadership We will continue to be strong advocates for alternative lenders; be a source of insight and facilitators of a network of lenders and associates. My congratulations to everyone else nominated for The Leadership Awards, taking place on 16 March 2023, as part of Credit Week.

FOS discussion update

Published 09 February 2023

It was good to talk to the Financial Ombudsman Service earlier in the week. We raised some concerns that our members had during the FOS discussion. However, we also welcomed their commitment to more engagement with the consumer credit industry. One of the issues that we are particularly keen to raise in our FOS discussion is their approach to Consumer Duty. The risk that people have mentioned to me is whether we will see differences in approach between the Financial Conduct Authority and the FOS. Unfortunately, there is a belief that sometimes there is a disjoint between the two organisations. I know that they would push back strongly on that suggestion. However, there have been a number of times when it seems that there are differences. From what we heard, the FOS are well aware of this concern and are trying to mitigate this risk by working closer to the FCA. There was an interesting FOS discussion about good outcomes. Looking at how this is implemented across different sectors and products. Remember if you are a CCTA member then please keep talking to us. Raise any issues you have with us. I am always happy to provide more information about our work. If you are not a member of the CCTA but are involved in non-bank lending, then please consider joining. More information can be found here.

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.”