CCTA Response: The Woolard Review
FCA Call for Input: Review into change and innovation in the unsecured credit market (The Woolard Review)
CCTA welcomes the opportunity to comment on the review into change and innovation in the unsecured credit market. We are concerned that not enough focus has been given to the issue of consumer needs for financial smoothing products, especially with consumers in several socio-economic groupings deemed to be making ends meet, or having more month than money.
The old puritanical saying that people should live within their means, is sound advice and should be ‘schooled in’ at an early age. We have long been an advocate of financial education, and supported Credit Action/Money Charity through financial contribution, by certain members funding student money manuals for all new university entrants, and by our CEO being an active Board Member of the charity for a period. We believe that it is a priority that all governments have failed on, because it is difficult to achieve and probably of limited political value. However, the danger, stresses and strains, of not understanding day to day finance is a major issue impacting on personal and family relationships the length and breadth of the UK.
All financial services are a risk as life, both personal and business, does not always run smoothly. Disruption and change grow faster in our ever-changing world, impacting on businesses and consumers alike, so occupations and relationships are constantly changing. Credit is therefore, and ever will be a risk market, but a market that is a necessity for the precarious state of the UK economy, and the extreme reliance on consumer spending to underpin UK GDP. Unless there is a seismic shift to massive industry productivity the economy desperately needs the current levels of domestic spend, in fact if there is a bad exit from Brexit consumer lending will need to be substantially higher.
If the intent from the regulator was to completely de-risk credit and remove the consumers from the supply side who live on credit and spend more they earn, by vehicles such as, multiple credit cards, it would create distress and anger with the consumer. In fact, there well may be an outcry by constituents to their Member or Parliament that the FCA is deciding social policy which they would assume is for Government. Similarly if the affordability cure was to take millions of consumers out of the use of flexible credit, there would be outrage from both the consumer and politicians in depressed areas, with the so called Conservative northern ‘red wall’ potentially reverting back to Labour.
Progress cannot and should not be delayed but the current pace and thrust of regulation will have severe impacts on the access to responsible credit products that the consumers want. Similarly all parties should come together with government and consumers to shape the future before mechanistic, over-regulation, data modelling, and third party data ruin the economy by limiting the supply side.
The Competition Commission (CC) inquiry model structure works well in addressing the supply and demand issues. We have been involved in many CC inquiries over the years and the call for evidence, submission, and interrogation was unremitting but the CC always sought to protect the supply side for the consumer.
We are not attacking the regulator who over the last few years has done sterling work, but attempting to protect the consumers access so that on our watch we will have done everything possible to ensure that consumers can have aspiration, choices, and freedom of choice to make up their own mind on how much responsible financial flexibility they want in their own life.
COVID has presented further economic upheaval and will continue to do so for the near to medium term future. The country is in affordable hock, albeit a record 300 year borrowing amount at the moment. Providing interest rates do not rise it is affordable, but is it sustainable? The Government plan is to move the populace back to spending post COVID to boost GDP. Further de-risking the consumer credit market will cause a hiatus, when a steady progression out of the red is required.
It is fair to say that we have had 20 years of social change in the blink of an eye compounded by COVID. Government and the regulator should take stock of that, and rather than more tinkering with further regulation, we need to stand back and ask the consumer whether the current regulatory is working for them. In the blink of the eye we are fast becoming a cashless society, the gig economy is here to stay, as is the growth on online retailing. More data is being gathered, sometimes without the consumers knowledge, with the danger of generating a financial underclass by default.
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