Movement on access to credit

Commentary | 08/11/24

Access to credit has always been central to the work of the CCTA since it was founded over 130 years ago. We have a long-standing project to protect access to responsible credit for customers that often struggle to borrow elsewhere.

In recent months, we have seen a greater interest in access to credit and financial inclusion from a range of external stakeholders which as been encouraging.

Firstly, we have seen this from the new Labour Government. Prior to the announcement of the General Election, the Labour Party outlined its commitment to a National Financial Inclusion Strategy, should it gain power. This was reinforced by Tulip Siddiq MP, the Economic Secretary, at the party conference which took place in September.

The Secretary said that the strategy will be designed and implemented by a committee chaired by a treasury minister with representation across government, regulators, and industry. Through writing to the Secretary, and in our regular discussions with HM Treasury officials, we have expressed our desire to play a role in the process. We believe the experience our members have of lending to those currently will be vital to the development of the strategy.

Over the last few years, we have tried to draw attention to the significant reduction in the supply of regulated credit for those consumers who cannot access the prime credit market. Well-regulated alternative credit can play a role in meeting unmet demand within the wider consumer credit market.

Though we support Credit Unions and CDFIs—indeed, they form part of the CCTA membership—these organisations alone cannot fill the gap that has been left. We believe a blend of commercial and not-for-profit providers is needed to solve the current problems and address the use of loan sharks.

This is the message we have been trying to convey in recent meetings.

Our conference also was an opportunity to hear from other stakeholders about their work in this area. Fair4all Finance talked about their desire to work with the private sector on new products, referencing the c.2 billion of estimated current unmet, but potentially commercially viable, credit quoted recently by L.E.K. Consulting. Discussions continue with members of the CCTA about potential partnerships.

We were also lucky enough to have Chris Pond, Chair of the Financial Inclusion Commission speak. Unsurprisingly, they are supportive of the new Strategy promised by the Government. The Commission has released new research carried out by the Centre on Household Assets and Savings Management (CHASM) at Birmingham University, which highlights the harms financial exclusion continues to cause in communities across the UK. This is a problem that needs to be addressed.

We have also seen the regulator take a greater interest in access to credit in recent times. The FCA has been keen to engage with the sector on the issue and we have taken the opportunity to raise the role the industry can play in improving access to credit, as part of wider discussions on growth and innovation.

Financial exclusion is costly to the country. The credit products offered by CCTA members allow people to take new job opportunities or get their cars back on the road, ultimately contributing to the wider economic growth we need and the Government is calling for.

We will continue these discussions and look forward to updating members on progress at our Winter Summit.