What’s regulation got to do with it?

As the FCA and the consumer credit industry celebrate their paper anniversary, it seems appropriate to consider how the first year has gone

Surprisingly, the answer appears to be “not that bad”, at least for the majority of people. The new regulations have caused consumer credit companies to have a good look at themselves, assess if they treat customers fairly, ensure the people they are lending money to will be able to afford to pay it back, and evidence their processes.

While all of this is good, it has also proved to be time-consuming and complex, with the smaller companies suffering proportionally worse. Whereas big companies are often able to dedicate specific staff, or sometimes entire teams, to compliance, it’s often left to senior management to prepare it at smaller companies.

As the FCA is a principles-based lender, with its various regulations often open to a degree of interpretation, the regulator has dominated the industry conversation for more than the past 12 months.

At Motor Finance, we’ve been to a number of events which have been dedicated to regulation, and The Motor Finance Conference also has speaking slots dedicated to the topic.

People want to know how others have interpreted various rules. With the FCA’s business plan for 2015/16, though, the regulator said it plans to look at one of these, affordability, in more detail in the coming months.

Hopefully, this will lead to some more consistency in approach to the topic.

The various ways the various lenders have approached topics like affordability is currently causing all sorts of havoc for brokers and dealers, who have to keep up with the changes lenders are making while also trying to get their heads around the FCA rulings themselves.

I would strongly urge readers to have their say when the consultation paper on the topic is published.

While the entire motor finance industry has largely been focused on the FCA, it’s fair to say the FCA’s attention has been spread out due to the huge number of companies it inherited in 2014, when consumer credit came under its remit.

As a result, much of its focus was on other areas. The regulator scored some big wins in the payday sector, where companies such as Wonga have really had to change their ways to survive. It also found itself in trouble with the insurance industry, though, after a press interview caused an unforeseen reaction, and played havoc with the market.

While the national coverage of the regulator has therefore focused on other topics, the feedback we’ve received from subscribers is that the FCA has been happy to talk to motor finance companies that have questions.

And as more and more companies go through the authorisation process, it seems likely more and more will have questions.

As outlined in the business plan, the FCA intends to start looking at issues which affect the entire consumer credit industry, such as affordability, rather than specific parts of it, such as payday lenders. It therefore seems likely that, over the next 12 months, we can expect to see more from the regulator.