On Tuesday 7 May, the APPG Debt and Personal Finance held an event on ‘A credit market that works for everyone: success and future challenges’. Guest speakers at the event included regulators, consumer group and credit industry representatives and the Minister.
Economic Secretary to the Treasury, John Glen spoke about the importance of the Government’s affordable credit agenda. Mr Glen said everyone will likely need a form of credit at some point in their lives. So besides high cost credit, which is often inappropriate, Government is looking to give people better options.
Mr Glen said the Government’s initiatives on affordable credit include the creation of Fair4All Finance, which has been given £55 million to help expand provision of affordable loans. Ministers are also looking to create a no-interest loan scheme – following a feasibility study, Ministers hope to take this forward at the next Budget.
Richard Lane, Director of External Affairs at StepChange Debt Charity said while there’s no room for complacency, there’s also much to welcome from the FCA’s consumer-focused approach. The FCA’s landmark reviews of key markets have produced the payday loan cap, credit card persistent debt rules and an upcoming ban on additional unarranged overdraft charges. These steps are making a real difference to people’s lives.
Mr Lane called for the FCA to introduce a ‘Duty of care’ to stop firms exploiting consumer biases or constrained choice. The Government’s affordable credit agenda is a welcome and will give people more product choice. However, the FCA should be taking a more proactive stance on consumer harm and Mr Lane called for robust action to tackle emerging problems the charity’s been seeing with sub-prime credit cards and guarantor loans.
Stephen Sklaroff, Director General of the Finance and Leasing Association praised the FCA for getting a handle on complicated credit markets. The FLA’s chief concerns were around inclusion and unintended consequences from regulation. Mr Sklaroff also pointed to aspects of consumer credit law that are out of date.
Mr Sklaroff welcomed the FCA’s review of retained provision of the Consumer Credit Act and said it was now up to the Government to act. The FLA’s preference is for legislative change. If this can’t be achieved, then Government, regulators and industry should look at non-legislative options.
Christopher Woolard, Director of Strategy and Competition at the FCA said the regulator has acted on fundamental problems in the credit market. Mr Woolard pointed to some of the FCA’s key achievements: actions to curb problems caused by payday loans and measures to help customers struggling with persistent credit card debt.
Mr Woolard outlined the FCA’s concern about the lack of mid-cost credit options, which is one of the FCA’s ‘biggest challenges’. Overdrafts, buy now, pay later, credit card ‘de-anchoring’, and guarantor loans remain key concerns. The FCA’s supervision ‘never stops’ and Mr Woolard stressed the FCA wants to ‘look at business models far more’.
The collapse of Wonga has left thousands of consumers out of pocket and Damon Gibbons from the Centre for Responsible Credit questioned the FCA’s decision-making in this case – and more generally, how can the regulator be better held to account? The Minister pointed to the FCA’s hearings at Treasury Committee – which happen twice a year. A forthcoming review of the tripartite relationship, between the Bank of England, the FCA and Government, is also a space where these kinds of issues might be raised.
Peter Wallwork from the Credit Services Association asked the Minister to consider the need for a more sustainable funding formula for debt advice – a point also raised by Mr Sklaroff. Industry groups says the levy hits them disproportionately, and other sectors generating problem debt, such as utilities and government, should be made to pay.
Mick McAteer from the Financial Inclusion Centre said there are concerns over lenders discriminating against or targeting certain groups. More data should be made available on lender performance so that consumer groups can hold them to account. Responding, Mr Woolard said that data had been used in this way in the insurance market. He added that the FCA had found it was hard to make this data into something which was accessible to consumers. He suggested that if this were to happen in the lending industry, intermediaries would be required to help interpret the data.