In Focus Consumer Credit


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A step forward The Standards of Lending Practice


for business customers represent a major step forward for the industry and the commitments it makes to its small-business customers, in what is largely an unregulated area other than lending captured under the Consumer Credit Act. They clearly set out the expectations on


firms at each stage of a defined customer journey and establish robust examples of what ‘good looks like’. It is recognised that the standards are not


a panacea for the ills of the past but instead represent a commitment to a framework which seeks to achieve higher standards of conduct. The Standards of Lending Practice for


business customers allow for firms to demonstrate that they are adhering to the required outcome, but, at the same time, recognises that not all businesses are the same and that there is not one type of lender model. They allow for flexibility in approach


whilst ensuring that customers are treated in a fair and transparent way. The scope of the standards has been


extended from the micro-enterprise limit, of a maximum £2m turnover and 10 employees, to businesses with a turnover of up to £6.5m. This figure is consistent with the bank ring-fencing regulations. We believe that this is a major step


forward as the increase captures, and provides protections to, a greater number of small businesses.


They clearly set out the expectations on firms at each stage of a defined customer journey and establish robust examples of what ‘good looks like’


Independent monitoring As with the personal side, the new standards will be independently monitored and enforced by the LSB. We will be undertaking a programme of work combining risk assessments at firms with thematic-review work focusing on those areas where there is the highest impact on fair customer outcomes, such as transparency at point of sale and how businesses are treated when they get into a turnaround situation. Where firms do not meet the standards,


then we will agree remedial action to address any issues identified. Where firms fall significantly below what is required, then we will hold those firms to account, which could result in public censure. In addition to ensuring that there is no


loss in the protections provided under the Lending Code, new protections have been introduced which have sought to strengthen the overall transparency, consistency of information, and customer care during the


relationship lifecycle. The standards are seeking to ensure that business customers receive timely information during key aspects of their interaction with their lender; from the provision of information regarding the likely timescales required to approve an application, to the timeliness of interactions with the customer during the relationship, through to the support available for firms which are experiencing financial difficulty. In addition, the standards recognise that


businesses are people-led and run, and, therefore, these individuals may experience a life-changing event which impacts upon their ability to effectively run their business. As we know from the personal side,


vulnerability is not a static state, limited to one group of people; anyone can encounter a situation that might make them more susceptible to detriment.


Evolving project The initial launch of the standards represents a milestone in what will be an evolving project. Work will continue throughout the year on extending the product scope to asset finance – hire purchase, leasing, invoice discounting, and financing – and commercial mortgages. In early 2018, we will seek to add in peer-to-peer lending. We believe the standards demonstrate that


the industry recognises the contribution small businesses make to the overall economy and that this is underpinned by a commitment to ensuring that small businesses receive consistent, fair treatment throughout their relationship with their lender. CCR


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www.CCRMagazine.co.uk


April 2017


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