In Focus Consumer Credit


Combining the most effective performance-


management, training and competence, and remuneration schemes looks like a strategic project of the same scale of GDPR in 2018 and one that needs to be tackled now, as our sector prepares for a follow-up thematic review on the suitability of debt advice. The lessons learned from the June 2015 report need to have been demonstrably addressed.


Into focus The FCA’s ‘Dear CEO’ letter of 8 December 2016 has brought into focus the issue of consumers not acting in their own best interests and repeatedly making poor decisions. I believe that the FCA has been perplexed as to why consumers do not engage in reviews or do not select the recommended debt solutions from experienced advisers in the free-to-consumer and commercial sector. Initial focus seemed to be that commercial firms were just protecting existing revenue streams, however, the hard evidence from all providers is that consumers do not consistently engage and often prefer to maintain the status quo, or do not want to engage in a process that involves meaningful effort on their part. Debt collectors have been faced with a


tidal wave of consumers that have been terminated by their debt manager, but have decided to do nothing as an outcome and have become non-payers from having been regular, reliable payers. Protracted forbearance is not the answer


and debt collectors do not want to become debt advisers where the evidence presented,


September 2017 www.CCRMagazine.co.uk


of a consumer with multiple consumer debts with minimal disposable income, suggests that bankruptcy looks ‘on paper’ the right option. This creates a real dilemma for a creditor or their agent. MAS has been looking at ‘the journey to


debt advice’, which DEMSA is involved in. This relates to the 8.2m consumers that are perceived to need some form of external support with their finances. I have concern with those that have already engaged, but have now disengaged. For those recently authorised debt-management firms that have been subject to the full ‘bonnet up’ assessment of their termination policies and review policies, they will be well versed in what the FCA expectations are.


Looking forward We should expect a lot more terminated debt-management plan clients through 2017 and into 2018. Expect more market consolidation and reduced consumer choice. Expect more unregulated activity in the IVA lead-generation sector before the ‘perimeter’ (PERG 17) is properly patrolled by a regulator with any teeth.


We should expect debt collectors to


distance themselves from regulated debt advice as far as they can, which will present real challenges around CP17-20 where trying to collect ‘settlements in full’. Practicing TCF around clients with


multiple debts is going to be a major project in itself and many of the messages from the credit-card market study will come to the fore, especially around multi-cardholders with long-term residual balances near limit. As a director of several debt-solution firms


and former strategic development director of a credit reference agency, I am seeing a lot of new lending to clients already in established debt solutions. This is making conditional processing, such as delivery of suitability statements in durable medium, and adviser recommendations more complex at the ‘point of advice’ when clients assess what is important to them when making financial decisions around their preferred debt solution. There are now many protracted debt-


Protracted forbearance is not the answer and debt collectors do not want to become debt advisers


management plans because consumers want to regain control of their finances, but do not necessarily want to become debt free. This is most evident with homeowners with assets, who have no appetite for formal debt solutions and are quite happy with an interest free repayment vehicle for their unsecured debts running alongside their mortgage. Such is the challenge of dealing with consumers that are financially capable and astute, but not as the regulator would necessarily perceive it. CCR


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