CONSUMER CREDIT CCR FROM FCA TO THE FUTURE


Payday lending has been under particular scrutiny since the FCA came into power – but what impact have the new rules had on the levels of complaints in the sector? By Juliana Francis


ON 1 April 2014, the Financial Conduct Authority (FCA) became responsible for regulating the consumer credit industry – taking over from the Office of Fair Trading (OFT). Tighter rules on lending, higher standards of care, and new regulations on advertising to consumers had to be adhered to by some of the businesses that were deemed more of a ‘risk’, such as payday lenders. A year on, we can take a look at the


impact that this clarification of the rules has had on the complaints we see about payday lending.


Short-term lending Since April 2007 – when we first started covering a range of consumer credit-related activities – we have been hearing concerns about certain types of short-term lending, like payday loans. As lending from traditional banks


dried up, we saw more consumers than ever turning to short-term loans to get


hold of necessary funds quickly. When it came to repaying the loan, many people found they simply could not get the repayments together in time and spiralled into debt. For example, we began to see cases


where a £200 loan rolled over into a £1,000 outstanding bill when fees and charges were applied. However, the new rules brought in


by the FCA laid the groundwork for consumers to know exactly what they should – and more importantly should not – expect, when dealing with a payday lender. For instance, clarification on how many times a loan could be rolled over, or when it was appropriate (or not) to use a continuous payment authority were introduced. These changes empowered


consumers to complain when they felt that they had been treated unfairly. This has translated into a 46% increase in the number of complaints the Financial Ombudsman Service received about


payday loans in the last financial year (2014-2015). While it is disappointing that, in


around two-thirds of these cases, we find the consumer has not been treated fairly, the numbers of complaints still remains low in comparison to other financial products. This suggests that a lot of the times, businesses are getting it right. Of course, there is still always the


issue of unscrupulous and unregulated lenders exploiting some of the most vulnerable consumers in society – and we are ever-vigilant for signs of this. However, as the dust settles after the transition to FCA regulation, our hope is that practices continue to improve. CCR


Juliana Francis is senior ombudsman – banking and credit, at the Financial Ombudsman Service E-mail: Juliana.Francis@financial- ombudsman.org.uk


TIME FOR MORE EFFICIENT COURTS


OUTSIDE of our criminal courts, millions of individuals every year use our courts to deal with injustice in their everyday lives. Without our civil and family courts, or our tribunal services, our contracts are unenforceable, and individuals left with no recourse when deprived of their rights. But it astonishes businesses and


individuals alike that they cannot easily file their case online. And it astounds them that they


cannot be asked questions online and in plain English, rather than on paper and in opaque and circumlocutory jargon. The current system adds to stress


at times of need, and restricts access to high quality resolution of disputes by simply being too complex, too bureaucratic and too slow. Across our court and tribunal system we need to


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challenge whether formal hearings are needed at all in many cases, speed up decision making, give all parties the ability to submit and consider information online, and consider simple issues far more proportionately. The reform programme which the


judiciary want to implement is being planned now. We have already committed to invest in the technology which will underpin it. This reform programme could liberate


tens of thousands of individuals from injustice and free hundreds of thousands of hours of professional time. Online solutions and telephone and video hearings can make justice easier to access and reduce the need for long – and often multiple – journeys to court. And we can reduce our dependence on an ageing and ailing court estate


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which costs around one third of the entire HM Courts and Tribunals Service budget. Inevitably, that means looking again at


the court estate. It is still the case that many of our courts stand idle for days and weeks on end. Last year over a third of courts and tribunals sat for less than 50% of their available hours (10am – 4pm). At a time when every government


department has to find savings it makes more sense to deliver a more efficient court estate than, for example, make further big changes to the legal-aid system.


By Michael Gove, the lord chancellor and secretary of state for justice Edited from a speech given at the Legatum Institute


July 2015


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