In Focus Consumer Credit


Adding value in the regulatory world


The move from the Lending Code to Standards of Lending Practice represents more than just a change of name


David Pickering Chief executive, the Lending Standards Board davidpickering@lstdb.org.uk


Adding value is a much-used phrase in the corporate world and is a sort of holy grail, with ‘suppliers’ aiming to deliver it to their clients, and clients seeking it from suppliers. The belief is that, if achieved, clients will continue to buy the service or product. In truth, succesful organisations generally


add value – or at least are perceived to have done so – and added value often changes as the commercial environment in which they operate changes. This has been as true for ourselves as it


has been for so many others. When the FCA took over responsibility for consumer credit from the OFT in April 2014, our role – in particular the format of the Lending Code and how we delivered our independent monitoring – had to change to remain relevant to firms that were now being supervised by the FCA. We quickly realised that conducting large thematic reviews – our main source of assurance – would be duplicating effort; coupled with a Lending Code that was prescriptive and, in many areas, replicated what was contained in the consumer-credit sourcebook (CONC). So what did we need to consider? First,


we had to define what added value would look like. Using the Lending Code review


as a catalyst for change, we knew we had to do two things as a minimum: bring the code up a level, removing overlap with CONC; and deliver effective, independent oversight while reducing the burden on firms. While these were key considerations we also felt any changes we made had to have consumer protection at the heart of their thinking.


Analysis This analysis led to several developments. Firstly, the code was replaced by the Standards of Lending Practice; this was more than just a change of name – instead it has represented a move towards high-level principles. Gone are the detailed provisions of the Lending Code and, in their place, are a series of consumer outcomes underpinned by a set of standards. Based on a typical customer journey, the standards now include new areas such as vulnerability and money management; the value that the standards can provide will lie in their continued evolution, focusing on emerging areas of risk to the consumer. Having launched the new standards in


July, the challenge for us is to ensure the new oversight regime is successfully implemented. So what does this look like? It effectively


consists of three elements. We felt we needed to be more than just an assurance function, although making sure the standards are adhered to and holding firms to account where they fall short, is still our top priority.


Risk-assessment review With this in mind, we are currently undertaking a risk-assessment review at all our registered firms to gauge the effectiveness and maturity of internal governance in order to determine the oversight strategy for that firm. Subsequent assurance work at firms will focus on how they are achieving consumer outcomes. The other two strands of our approach


are development and advisory. Development is focused on improving


and strengthening the standards, working collaboratively with firms to achieve this. We have two major development projects under way, further details of which can be found on our website, one covering how to assist firms in meeting the standards, where the customer wants to transact digitally, and the other helping to define what good looks like in the lending to small businesses. The advisory element is new for us and is


exactly what it says: providing advice to firms in helping them to meet the standards. It seems sensible to use our capability to help our registered firms to achieve this; ultimately we both have the same aim of wanting good consumer outcomes. In terms of added value, we believe we


will achieve this for firms and ultimately for consumers but we need to make sure that we continually evolve both the standards and the oversight regime. Standing still is not an option. CCR


22 www.CCRMagazine.co.uk January 2017


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