Credit Strategy – Top Credit News by Credit Strategy
At today’s annual meeting (September 24), which was held digitally, the FCA board discussed and answered questions on a range of topics, covering its own reforms, online advertising scams, overdrafts and, more specifically, its review of the unsecured consumer credit market, including regulations scope for this sector.
Asked about the review, which will be led by outgoing FCA Interim Managing Director Chris Woolard, Woolard said he would consider buying now, paying later and salary-linked loan products – which lie both outside the perimeters of the watchdog.
Woolard explained that the FCA had seen “an important shift towards these products” which remain outside the jurisdiction of the regulator because they fall under exemptions to an old law “and intended to deal with other things”.
The FCA also addressed the issue of the collapse and exit of payday lenders in recent years, due to more intense regulatory activity, and whether the review could open a new approach, and whether the demise of providers High cost credit could leave customers with little choice but to turn to illegal money lenders.
The regulator was asked: “Surely the FCA should have been working with the lenders with the financial backing and the power to rectify their mistakes, rather than leaving customers more vulnerable, by pulling these lenders out?”
Woolard added: âIt is clear that we have seen a lot of regulatory activity in this market. There was a serious fault that needed to be rectified. We have also seen a series of findings from the Financial Ombudsman that relate to the misconduct part of this equation.
âSo there was a lot of pressure on that part of the industry. There is often a proposition that if many of these lenders leave the market, what we will see are unregulated lending amidst clandestine operations and illegal money lending. Overall, we don’t see huge evidence of this happening, despite this contraction, and we are working very closely with Trading Standards and the Illegal Money Lending team.
âWhat we’re seeing in other parts of the market is innovation. It’s largely in the retail space outside of our perimeters. Part of the reason for the review is to take stock of this market and see how it is developing.
âAt the heart of it all, is the question whether there is a sustainable and compliant business model, when you correct these problems and remove this harm to consumers. Are these companies able to stay in the market? In many cases, the answer was no. “
Jonathan Davidson, Director of Oversight – Retail and Licensing at FCA, said: âThe number one priority for us is affordability. very profitable when customers cannot afford to repay.
âThe issue that concerns me the most is the phenomenon of an individual’s affordability testing on a loan application, which is presented as ‘affordable’, but then that consumer takes a whole chain of those loans that starts to indicate that the loan is unaffordable, because the consumer must continue to withdraw it. “
As to whether reviewing unsecured credit will open up a lighter approach for payday lenders, Davidson said, âUntil then, there will be no relief from our approach to ensuring loans are affordable in the future. this space. “