Press Release

WHAT DOES THE CONSUMER CREDIT MARKET HOLD IN STORE FOR LENDERS?

15 September 2006

FLA’s Consumer Credit Convention on 14 September gave delegates an insight of what their businesses can expect in the near future. Martin Hall, FLA Director General, opened the conference with a review of the consumer credit market, focusing on recent events and forthcoming changes. In her Keynote Address, Laurel Powers-Freeling of American Express expanded on this, but with particular attention to the burgeoning insolvency market seen in the UK.

Regulation was next on the agenda, with Ashley Holmes of FLA pointing out the problems with the proposed EU Consumer Credit Directive and the depressing effect that its responsible lending requirements and pre-contract information requirements would have on economies across Europe. He was followed by a leading consumer lawyer, Alison Gaines from Salans. She set out the implementation timetable for the Consumer Credit Act 2006 and its impact on business, including how complaints procedures would change once the Financial Ombudsman Service starts to handle consumer credit cases.

After coffee, regulation was once again on the agenda, with David Beckett from the Office of Fair Trading (OFT) outlining the OFT’s future role in the consumer credit market. He particularly emphasised the changes in the OFT’s powers with regards to licensing and what the new ‘fairness’ criterion would mean for credit agreements. Paul Ramsden from Trading Standards Institute defined how trading standards would work with the OFT and others to investigate and enforce the letter of the law under the Consumer Credit Act.

The afternoon was devoted to financial capability and how over-indebtedness impacted upon the UK economy. Shaun Mundy from FSA delivered an outline of how the FSA intends to reach ten million people in different settings with financial education messages by 2010. Fiona Price (DTI) summarised the extent of over-indebtedness in the UK, before moving to the Government’s plans to tackle the problem, and what role lenders will have to play in that.

In a strong defence of the lenders’ perspective, Simon Baum of Alliance & Leicester advocated full data sharing, both of income data and historical data, stating that lenders can only lend responsibly when all the information is there – in his view, this would include both student loan data and government data. Mr Baum also suggested some changes to IVAs and IVA regulation being introduced to make the schedule of payments fairer between Insolvency Practitioners and lenders.

A lively panel discussion followed, with an unprecedented amount of audience participation, about how financial services providers can and should respond to their customers’ needs, chaired by Liz Barclay of BBC Radio 4’s ‘You and Yours’. In his look at Future Trends in the consumer credit market, Brian Brown of Defaqto examined several economic indicators, and predicted a rise in the base rate and in unemployment. Specifically in consumer credit, he suggested demand is slowing, and competition is fierce, driving down margins. Related products like PPI are suffering from an image problem, he said, and sales are likely to drop off sharply.