In Focus Consumer Credit


Are consumers making informed choices?


With substantial changes underway in the debt-advice sector, are the right outcomes being achieved?


Kevin Still Director, DEMSA and Credit Professionals Kevin.Still@demsa.co.uk


The FCA published a final mission statement earlier in 2017 and it, alongside government policy, clearly places more of the burden of financial decision-making back on consumers with regard to key money management and investment choices. Is this as a result of austerity measures or


a genuine re-balancing of responsibility where consumer-credit firms are now more tightly regulated and expected to demonstrate visible evidence of their TCF policies and delivering positive consumer outcomes? Where does the burden of responsibility


sit with regards to monitoring consumer decisions at critical life stage points, such as retirement, house buying, and family planning, or times of acute financial stress?


Clear warnings At the same time, the Bank of England and the FCA annual report has issued warnings on rising consumer indebtedness. StepChange has continued to voice its concerns around the need for an ‘implemented’ breathing space initiative. Moreover, the recent outcome of the snap


general election has created a climate of more political uncertainty, which is never good for effective decision-making around critical topics like consumer financial education, or dealing with conflicting political objectives of relying on consumer spending whilst imposing measures to cut core consumer support services, especially to vulnerable and less financially capable individuals and households in the UK. This is further compounded by the


outcome of the Thematic Review (FG15-10) entitled ‘Risks to customers from performance management’, notably in the areas of credit


18


The recent outcome of the snap general election has created a climate of more political uncertainty, which is never good for effective decision-making around critical topics


management and recoveries. Not only has the FCA focused on negative behaviours – such as apparent aggressive, commission- fuelled, collections activity driven by the cultural tone set by the governance functions of the firms – but also the risk that some firms may throw the baby out with the bath water in terms of TCF driven remuneration schemes that are geared to positive consumer outcomes. I welcome the launch in July 2017 of the updated CSA Code of Practice and, in particular, Section 3 (Common Principles) – ‘Dealing with customers in vulnerable circumstances and financial difficulties’.


‘The same bucket’ I have a major concern with the resultant consultation paper (CP17-20) having put regulated debt advice in the same ‘bucket’ as debt collection and debt purchase. The FCA has acknowledged that this is not a good fit. No debt management firms were selected


amongst the 98 consumer credit firms in the review and DEMSA was not consulted before the paper was issued. The pigeon-holing of debt management services in consumer credit remains a mystery


www.CCRMagazine.co.uk


to me, and a source of consumer confusion, as references to ‘debt management’ by the regulator and other consumer advocates continue to have a dual meaning. The services should be mutually exclusive, from a permissions perspective, otherwise the risks of conflicts of interest become untenable. Whilst in correspondence with the FCA


around the paper, we have looked at the links with the Senior Management & Certification Regime consultation that is due very soon. With implementation looming in 2018 for consumer credit firms, better understanding of a proportionate senior management regime to replace the Approved Persons (APER/FIT) regime is really important for the relatively small firms amongst the CSA and DEMSA membership, with the DEMSA membership genuinely made up of SMEs. Most of my members have only just adopted the Approved Persons regime. Of equal importance is the potential


impact of the certification regime. I had the opportunity to ask Andrew Bailey, chief executive of the FCA, several questions around this at the last trade-body event in January 2017. There is a real possibility that debt advisers are brought into the certification regime in the same way that mortgage advisers have been. Given the uncertainty around the Money


Advice Service (MAS) accredited training programmes for debt advisers, this may create a real dilemma for firms in the sector. Debt advisers are typically low paid compared to other qualified professions in the consumer-credit sector. Attracting the right people with the right culture and motivation may prove a huge challenge.


September 2017


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52