FEATURES | NEWS BRIEFLEGAL NEWS | YOUR CCTA MEMBER NEWS | MEMBER ONLYINDUSTRY STATS

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THE CONSUMER CREDIT MAGAZINE FROM CCTA APR:JUN 2015 V70 NO.2

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NOTE: With diverse contributing authors, the views expressed in this magazine are not necessarily the views of CCTA.

CONTACTSGreg Stevens, Chief Executive greg.stevens@ccta.co.uk

Graham Haxton-Bernard, Head of Legal, Compliance and Regulatory Policy graham.haxton-bernard@ccta.co.uk

Anne Threapleton, Head of Marketing and Communications anne.threapleton@ccta.co.uk

Debbi Gower, Head of Finance, Complaints and Conciliation debbi@ccta.co.uk

Phillip Harding, Membership Services Manager phillip.harding@ccta.co.uk

Consumer Credit Trade AssociationA company limited by guarantee and registered in England. Registered Number 00034278.

VAT Number 232 4655 76. Registered Office Address

Airedale House, Aire Valley Business Park, Dowley Gap Lane, Bingley, BD16 1WA

T: +44 (0)1274 714959 F: +44 (0)1274 928365 www.ccta.co.uk

REGULARS:News Brief 12

Legal News 20

Your CCTA 22

Member News 24

Member Only 29

Stats 39

The parable of the fox and the scorpion also stayed with me, as I developed change management and cultural modules for the consumer credit industry in the late 80’s, and early 90’s.

The nature of the scorpion is to sting, it is part of its DNA. In the parable, as the fox and the scorpion looked at a fast flowing river they wanted to cross, the fox offered to carry the scorpion on his back, providing that the scorpion promised not to sting him. The scorpion assured the fox that if he was carried over the river to safety he would not sting. Once the fox had swum the river and reached the opposite bank, the scorpion mortally stung him. The moral of the parable is that DNA will out, and is stronger than a desire or promise.

Many businesses and people believe they are capable of change and want to change, but when push comes to shove they revert to type, their true nature. Self deception is rife on an industrial scale in areas like diet, exercise, or financial control. In short ‘doing the right thing‘ is extremely hard without an iron will, and a capable and willing supporter.

When testing any cultural modelling, a good litmus is to watch what happens during ‘the sticky moments such as the end of a financial period, when rules could be relaxed to achieve a business goal.

From several non-member company directors we have had protestations regarding the FCA inference in their business model, which is patently not in line with FCA CONC & Principles, but was OFT compliant. These firms will struggle to achieve metamorphis whilst the current angst, rather than acceptance, rules the roost. Circumnavigation of the Treating Customers Fairly (TCF) culture will be frowned upon, and potentially expensive regulatory corrective action taken.

CCTA has been speaking to many companies who are currently not affiliated to any trade association and are looking for the Holy Grail and Elixir of Life combined, in order to thwart the perceived FCA threat to their business.

They are searching for a solution which would mean they did not have to change at all. Some have obviously been living in a cave for the last two years and are oblivious to the nature of FCA CONC & Principles, even though they have Interim Permission.

We reminded these firms that FCA regulation began in April 2014, twelve months ago, and that FCA Principles were in place at that stage. Compliance is costly and time consuming, but businesses who want to survive need to reflect on where they are after this first year. Their storyboard needs to illustrate a momentum and direction of travel that the FCA expect to see.

For those Star Trek followers amongst you I am using the words of the Borg to reinforce how power can drive culture.

“We are the Borg. We will add your biological and technological distinctiveness to our own. Your culture will adapt to service us. Resistance is futile.“

The Borg are mythical, but the phrase rings true in our current regulatory position. The FCA are using consumer credit data sets to challenge our business models, creating and imposing a new order, incorporating rate capping, continuous payment authority changes etc. Firms in different sectors are being told, not requested, to change their business.

Many firms have still not heeded the TCF agenda and are side stepping issues, even at board level. Leaders have to own the TCF agenda, and ensure that it is the true nature of the organisation before cascading it through the company. Putting the customer at the heart of your business is cultural, for many firms an unobtainable metamorphosis, which means they will not achieve full authorisation.

I believe that repetition is the mother of all learning, ‘resistance is futile’. Shouting foul at the regulator will change nothing.

Our training programme is targeted to assist you to drive best practice, but change has to be integral to your company. We are currently working with third parties and providers on a new cultural programme to deliver the modelling required by FCA Principles. The resulting additional training will be available in the next three months, and can be bespoke.

We fully support our members and continue to take their concerns to the regulator. We cannot change the DNA of the FCA, but we can point out unintended consequences which impact on the consumer, or delete and distort the market place. Change lies in your hands and will have to be visible to pass muster under the FCA lens.

Greg Stevens April 2015

I CAN REMEMBER FROM WHEN I WAS A YOUNG CHILD, THE POWER THAT PARABLES HAD ON MY THINKING, BY WHATEVER FORM OR MEDIUM THEY ARRIVED. ONE THAT STOOD THE

TEST OF TIME THROUGH MY INFORMATIVE YEARS, WAS THAT OF THE GOOD SAMARITAN, PROBABLY MY FIRST INTRODUCTION TO THE TRUE NATURE AND INSTINCT OF PEOPLE. AS THAT

THINKING DEVELOPED AND BECAME ROUNDED, I SAW THAT MANY PEOPLE WHO THOUGHT THEY WERE GOOD SAMARITANS, WERE IN FACT ‘SELECTIVE’ SAMARITANS.

LEADERS HAVE TO

OWN THE TCF AGENDA, AND

ENSURE THAT IT IS THE TRUE NATURE

OF THE ORGANISATION BEFORE CASCADING

IT THROUGH THE COMPANY.

Greg StevensChief Executive, CCTA

| FEATURE

4 5

THE FOX AND THE SCORPION, DNA WILL OUT!

THE NATURE OF FCA CONC AND

PRINCIPLES

TO ALL APPROVED PERSONS, DO YOU KNOW THAT YOU ARE AN INDIVIDUAL THE FCA HAS OR WILL APPROVE TO PERFORM ONE OR MORE ACTIVITIES OR CONTROLLED FUNCTIONS ON BEHALF OF AN AUTHORISED FIRM. IT IS NOT SIMPLY A TICK IN THE BOX!Historically, we have seen how regulators and regulated firms struggle with the important issue of approved persons. Until recently it was always the firm that would be brought to task and generally the individual would be left alone, those times are gone!There is a new promise from the FCA of potential personal liability if things do go wrong. A new ‘problem’ for consumer credit

firms, you need to quickly adapt to the Approved Persons Regime.

With Consumer Credit authorisation in full swing, I have seen firms ‘going

through the motions’ of choosing who their approved persons are

and whether they are ready to take on the associated

controlled function. At a recent consumer credit

event, I asked an audience of around 300 firms whether there

were any existing or future approved persons in the audience, I was met with a

plethora of hands! My next question was to ask the audience how many had controlled functions, the response didn’t surprise me, only two people raised their hand and one of those didn’t know which controlled function they had.If you take one thing from this article it should be that all Approved Persons will have Controlled Functions and that all Controlled Functions will have associated responsibilities, get to know what they are!The FCA’s ‘Being Regulated Guide’ provides some useful information regarding the controlled functions and associated responsibilities, please take the opportunity to read this guide.

PERSONAL ACCOUNTABILITYThe FCA has the power, ability and renewed desire to hold senior management personally accountable in firms through the Approved Persons Regime. Although the FCA’s Statements of Principle and Code of Practice for Approved Persons are new to consumer credit firms, they will be applied when firms become authorised. At a basic level, this means senior management need to be able to identify, understand and act on risks within their business and monitor those risks accordingly, ignorance is not a defence. Where the FCA finds failings in senior management, it can bring sanctions against individuals, ban them from holding controlled functions in the future, issue fines or impose jail sentences.

HELPING YOU TO HELP YOURSELFThere are number of very simple things you can do to prepare yourself for the ApprovedPerson Regime:• get to know what controlled function(s)

you have and the responsibility and accountability that is associated with it

• make sure you have the competence and capability to perform the role/s, this is just one of the ‘fit and proper’ tests and basically asks you to consider whether you have the knowledge and time to carry out the role effectively

• read the Statements of Principle and the Code of Practice for Approved Persons, then comply with them. They are all available on the FCA website

• test that the controls and oversight arrangements in your firm are suitable to ensure that you are not causing customer detriment, what is your story if the FCA asks this question?

• ensure your firm is ready for the reporting requirements of the FCA and that you are able to access this data easily in order to be able to share it

• test yourself before the FCA does.Being an Approved Person isn’t an impossible task but it will help if you can see.

Nick RossHead of Advisory Development,

Huntswood

| FEATURE

6 7

EYES WIDE

OPEN!

Emily NisbetChief Business Officer

| FEATURE

The payday lending industry has seen great change over the last five years and in more recent times, come under much more scrutiny from many interested parties. The ever evolving High Cost Short Term Credit (HCSTC) marketplace has been faced with consumer groups, debt advice charities, Parliament (and so the list goes on) expressing concerns about how our businesses operate and treat customers, so it was only a matter of time before regulations became more strict and firms were faced with the option ‘clean up or get out’!In the few months since the FCA imposed the rate cap, we have seen both lenders and lead generators exit the marketplace. We are seeing the once ‘horror story’ headlines taken from consumers experience, replaced with the corruption and wrongdoing of the lenders themselves, which highlight the poor practices that existed, and in some parts still do, before the regulations were in place. With companies currently trading on interim permission from the regulator, the question remains how many lenders will be left?The Financial Ombudsman states that 44% of the 12,084 customer enquiries since 2009, relating to the payday loan industry, have been within the last year. At Mr Lender we have seen an increase in historic complaints, surrounding both affordability and rollover issues which consumers are questioning, not under the FCA regulation, but under the OFT guidelines. It highlights for us, a HCSTC lender, that although the FCA regulations have given us the light at the end of the tunnel of making our industry the best it can be, the customer should have always been at the forefront of every business decision. While there seems to be a lot of uncertainty about just how we put our customer at the forefront of every business decision, if you work each day with the notion ‘if the customer was here what would they think and say’ it becomes pretty simple. The FCA has outlined quite clearly the main areas lenders should be focused on to be successful under the new regulation:• treat customers fairly• show forbearance and help vulnerable

customers• carry out affordability assessments and

ensure the product you are providing meets the customer’s needs

• be transparent • follow the rate cap• do not exceed two rollovers and assess

affordability before allowing customers to rollover.

While it is difficult to define for each individual business model how a company should ensure these standards are met, we can all

While as a company, we have made what I believe to be good decisions, we have only been successful in doing so because our management team has the desire, and wants to do what is right for the customer. While we are all trying to follow the new regulations and do the best we can, the lenders that will be left in our marketplace will be those who are doing it all for the right reasons. Being one of the remaining lenders in the market should project to customers and industry peers that you are a firm going against the once negative stereotype of the typical payday loan company. While the old stereotype of the consumer is one of desperation, let’s face it, the only way we will succeed in the current marketplace is by accepting that while a consumer may indeed find themselves in a desperate circumstance, we as lenders are the ones dependent on the consumer. I was asked in a recent management meeting what I want Mr Lender to be known for in the coming years. The answer, for me, was clear, I want to be the company that brings a new definition of what it means to be a short term lender by showing forbearance, being fair, transparent, and always putting the customer before profit.

take a similar measure, invest both time and training into every area of your business. A highly trained and skilled team will help you to succeed in this ever changing industry. All lenders should willingly be working with credit reference agencies, not just following the FCA outline, but also working together to improve clarity around real time reporting to aid responsible lending decisions. With quite a wide scope for interpretation, at Mr Lender, we are trying to make conscious decisions around putting the customer before profit. I will briefly let you into a few of these to highlight how every business can adhere, if they are willing to make changes. We have implemented a new policy around our debt collection process. After two months of a customer making no payment on their account (unless the customer has opted in to one of our in house repayment plans or have confirmed they are struggling financially or entering into a debt management plan), we pass their account to a Debt Collection Agency (DCA). We made the decision to pass these accounts on never exceeding 175% of the original capital borrowed. In a lot of cases our customer accounts are passed to our DCA at less than 150% because we realise that exhausting the rate cap is only going to push a customer to be in a worse financial position. Another decision we made was based around an internal review of our rollover policy. While we now, of course, adhere to the maximum rollover on any one account being two (which is agreed on less than 2% of all our loans), we wanted to ensure customers were not over using this option. When looking at our entire loan book including historic loans, we took it upon ourselves to refund all those customers who we felt, in hindsight, exceeded what we now deem acceptable. Although there historically has been little guidance on the rules around rollovers we felt this was the right thing to do for our customers, costing us around £100,000. Its business decisions like these, we believe, that show as a lender we are putting the customer first, which when it comes down to it, is what this whole regulatory process is about. I find myself coming back to the question, how many lenders will be left? As lenders exit the market, which has been labelled by the media and regulator as ‘high risk’, it could leave potential borrowers in an underserved environment with no way of obtaining credit. I hope at some point the balance will be found where we and other lenders can facilitate customers who can afford the product, without shutting the door on those who are struggling to access credit.

AN ENLIGHTENED PATH

IT IS NOTSIMPLY A TICK IN

THE BOX!

SENIOR MANAGEMENT NEED TO BE ABLE TO IDENTIFY, UNDERSTAND AND ACT ON RISKS. IGNORANCE IS NOT A DEFENCE.

IT MIGHT SEEM SIMPLISTIC,

BUT INVESTING TIME AND EFFORT TO MAKE

SURE COMPLAINTS DON’T BECOME ENTRENCHED IS THE

BEST WAY TO ENSURE THE INDUSTRY IS POSITIVELY

PERCEIVED.

Caroline WellsHead of Customer Insight

Financial Ombudsman Service

| FEATURENEWS FEATURE | SME’s

Measures under the Act will help small businesses by:• improving access to finance through

increasing the availability and sources of investment for small businesses, so that they can secure the funding they need to grow

• opening up access to small business credit data, levelling the playing field between providers and making it easier for a small business to seek a loan from a lender other than their bank

• requiring banks to pass on details of small and mid-sized businesses they decline for a loan, with the firm’s permission, to online platforms which can help match them with alternative finance providers

• introducing ‘cheque imaging’ to speed up cheque clearing times and increase customer choice in ways to pay

• increasing transparency on payment practices and policies through a tough new reporting requirement on the UK’s largest companies. Increased transparency will help address the current economic imbalance in power between small and large companies, it will provide small firms with the information they need to negotiate fairer deals, and it will shine a light on poor practice

• cutting down on red tape by ensuring that regulations affecting business are reviewed frequently and remain effective. Unnecessary regulation gets in the way of doing business, so the government is introducing a target for the removal of regulatory burdens to be published in each parliamentary term, holding future governments to account and enabling small firms to grow and get on with doing business

• appointing an independent Small Business Appeals Champion for non-economic regulators to ensure that the needs of business, particularly small firms, are taken into account with an understandable and effective appeals and complaints process

• assisting small business expansion overseas, increasing the support available from UK Export Finance and widening its powers to help UK exports and exporters, making it easier for all businesses, regardless of size, to expand in the international marketplace

• streamlining public procurement to remove barriers so that small businesses can gain better, more direct access to public sector contracts. Further measures will make it easier to raise concerns about poor procurement practices, ensuring these are small business friendly.

Other measures that came into law on 26 March include:• stopping abuse of zero hours contracts

by preventing ‘exclusivity clauses’ which stop individuals from working for another employer, even if the current employer is offering no work

• deterring employers from breaking National Minimum Wage legislation by amending the power to set the maximum penalty for under payment, so it can be calculated on a per worker basis

• enhancing the reputation of the UK as a trusted and fair place to do business, increasing transparency around who owns and controls UK companies and helping deter and sanction those who hide their interest in UK companies to facilitate illegal activities, including through the creation of a publicly accessible register of people with significant control over a company

• strengthening the rules on director disqualifications to widen the matters of misconduct courts must take into account when disqualifying, including conduct in overseas companies, and measures to help creditors recoup losses resulting from director misconduct

• reforming employment tribunals by encouraging more efficient management of tribunal postponements in order to reduce delay and cost, and will introduce a penalty to ensure that employment tribunal awards are paid promptly and in full

• streamlining insolvency law to remove unnecessary costs and ensure effective oversight of insolvency practitioners so they deliver their services at a fair and reasonable cost that reflects the work undertaken

• providing new and improved information on learning outcomes by tracking students through education into the labour market, fostering self-improvement by schools, colleges and higher education providers and informing government policy.

Source: GOV.UK

It has been a year since the Financial Conduct Authority (FCA) took over regulation of the consumer credit industry from the Office of Fair Trading (OFT). For many members of CCTA, the change will have been relatively seamless, for others, there have been dramatic changes. Caroline Wells, the ombudsman’s head of outreach and insight, talks about the challenges faced by the industry and how the Financial Ombudsman Service can help.

THE FINANCIAL OMBUDSMAN AND HOW THINGS WORKThe financial ombudsman was set up by Parliament to sort out individual complaints that consumers and financial businesses aren’t able to resolve themselves. We were created in 2001 and since that time our jurisdiction has increased to include everything from insurance and mortgage brokers, to peer-to-peer lenders. We’re not a consumer organisation or a regulator. Our role is to sort out disputes in a way that’s fair and accessible to everyone, taking in to account the individual circumstances that surround each case. We’re able sort out most consumer credit cases within three months, though this can depend on how complicated the case is. Our service is free to consumers, though we charge the business what it costs us to sort out a complaint (currently £550 a case). We’ve very much aware of the impact of this on smaller businesses, so for the past few years, we’ve not increased the case fee and businesses don’t have to pay it unless they get more than 25 complaints in a year.

THE WAY CHANGES IN CONSUMER CREDIT BUSINESSES HAVE BEEN PERCEIVED IN THE LAST YEARAs a general rule, the consumer credit industry is seen pretty positively. Since the industry became regulated back in 2007, we’ve been impressed by the number of trade organisations who’ve demonstrated a real willingness to understand what drives complaints. It might seem simplistic, but investing time and effort to make sure complaints don’t become entrenched is the best way to ensure the industry is positively perceived. Contrast that with the way financial services more generally are represented in the media, not to mention viewed by the public. It’s been years since the financial crash left people struggling to make ends meet. Despite the passage of time, large financial businesses are not viewed positively, and that can have an impact on anyone working in the industry. It’s clear that rebuilding the trust that consumers have lost in financial services is key to changing these perceptions. And one of the best ways to do that is to sort out complaints quickly and fairly.

HOW CONSUMER CREDIT BUSINESSES CAN GET HELP FROM THE OMBUDSMANGet in touch! There are so many ways we can help you, and our technical advice helpline can even help stop a problem coming to us in the first place. We also publish a wide range of common sense guides covering how we work, the cases we see and guides to our approach. You can also come and meet us at a range of events around the country where our experts are on hand to offer you support and advice. We’ve learned a lot about sorting out money problems over the years, and we want you to share that knowledge so you can continue to build long standing relationships with your customers, based on fairness and trust.

HERE’S HOW TO GET IN TOUCH• call us on 020 7964 1400, Monday to

Friday 9am to 5pm• come and see us at one of our events around

the UK. Find out more on our website: www.financial-ombudsman.org.uk/news/out-and-about.htm

• find out more about the services and advice we offer consumer credit businesses: www.financial-ombudsman.org.uk/faq/businesses/index.htm

• follow us on our social media pages, send us a tweet or check link with us on LinkedIn: www.financial-ombudsman.org.uk/contact/follow-us.htm.

THE IMPACT OF THE CONTROVERSY AROUND SHORT-TERM LENDINGThere’s little doubt that payday lenders have had a rough year. We’ve seen articles appear in the media almost daily and regular horror stories about consumers trapped in to a cycle of high interest borrowing they can’t afford.In practice the ombudsman hasn’t investigated a huge number of complaints about payday lending. Often, many of the people contacting us have a problem that can be sorted out with a simple phone call between us and the lender. We’re likely to finish the year with over 1,000 cases but this isn’t a huge number in comparison to the number of the loans out there. This doesn’t mean that the criticisms levelled against payday lenders were unfair. Our research suggested that many people either didn’t know of their right to come to the ombudsman or didn’t feel they could ask for help with their problem. We’ve spent a great deal of time working with payday and other short-term lenders and we’re seeing some real improvements. But I’m sorry to say that in some cases the behaviour of some payday lenders and credit brokers has been shocking.

FACT OR FICTION - THE OMBUDSMAN IS TRIALLING A NEW WAY TO LOOK AT PAYDAY LENDING COMPLAINTSWe realised quite some time ago that the way the industry and the ombudsman dealt with complaints didn’t reflect what people want or expect from us. It was also clear that for people experiencing financial difficulties, asking them to wait for eight weeks while their lender looked in to the complaint made their situation worse. That’s why we’ve been working with short-term lenders on a new project aimed at tackling problems from the moment consumers first contact us. We have a specialist team of adjudicators standing by to take calls, give a pragmatic assessment of the complaint and get on the phone to the lenders themselves to see what can be done to nip the complaint in the bud. We’ve also been speaking to debt collectors and other third parties who might be involved in complaints to tie up all the loose ends that can be associated with these cases. We’ve also focused on finding out what’s ultimately happened to the people we speak to that’s resulted in their situations becoming so difficult. We’re able to give practical guidance on where to turn for help for free.

SMALL BUSINESS, ENTERPRISE AND

EMPLOYMENT ACT RECEIVES ROYAL

ASSENT

HELPING HANDS TAKING CREDIT

9

MEASURES DESIGNED TO MAKE THE UK THE BEST PLACE IN THE WORLD TO START AND GROW A BUSINESS HAVE BECOME LAW FOLLOWING ROYAL ASSENT FOR THE SMALL BUSINESS,

ENTERPRISE AND EMPLOYMENT ACT GIVEN ON 26 MARCH 2015. THE WIDE RANGING ACT PAVES THE WAY FOR BUSINESSES TO GET IMPROVED ACCESS TO FINANCE AND PUTS AN END TO ZERO

HOURS EXCLUSIVITY CLAUSES. WITH MORE THAN 5 MILLION BUSINESSES IN THE UK, THE ACT WILL OPEN UP NEW OPPORTUNITIES FOR SMALL FIRMS TO INNOVATE, GROW AND CREATE JOBS.

8

Jeremy CrameCEO, Hitec

| FEATURE

BUSINESS PLANThose seeking authorisation should take the time and trouble to complete the regulatory business plan as this is the FCA’s primary window on to their business.The plan should be clear and concise, demonstrating that the firm has the experience and resources to embark on the activities for which it is involved. It must also evidence that employees have the necessary skill set, knowledge and expertise to carry out their business, clearly setting out those responsible for every step of a customer’s journey.The business plan should also demonstrate compliance and risk management, explaining how it will be implemented and monitored and made available for the FCA to inspect at any time. Firms that do not have a business plan, or have not revised one for some time, should do so straight away.

MONITORING AND SUPPORTOne of the requirements of the FCA is the need to provide documented evidence of processes and ongoing monitoring. The regulator expects all firms to do their own monitoring and take reasonable steps to monitor the activities of partners.

TREATING CUSTOMER’S FAIRLYThe FCA demands that customer interests are at the heart of how a firm does business, and is a condition in four of its 11 key principles.Treating Customers Fairly goes beyond proving that a consumer has been sold the correct product and is satisfied, firms must now demonstrate that the fair treatment of customers is central to their corporate culture. They must also prove that products and services sold are designed to meet the needs of identified consumer groups and targeted accordingly. The customer must be made aware of any risks or limitations of the product and offered an alternative option to allow them to make an informed decision.

BUSINESS RISKThe FCA’s definition of a business risk is a circumstance or factor that may have a negative impact on a firm’s operation or profitability. All consumer credit firms are required to put in place systems and controls to mitigate the risk that they may be used to further financial crime.

ATTESTATIONSAn attestation is a request from a regulator to a named senior individual to personally attest a certain set of facts relating to the firm. The FCA’s increased use of attestations is driven by its aim of ensuring that senior managers of regulated firms are clearly accountable and focused on specific issues that are on the regulator’s radar.

START YOUR APPLICATION FOR AUTHORISATION NOWAuthorisation is a bigger task than many people realise, allow plenty of time to complete your application and make sure you have all the relevant information.

FOCUS ON THE IMPORTANTCritical areas to focus on when making your application include: business plan, compliance manual, treating customers fairly (TCF), the customer journey, and conduct and business risks. If in doubt seek advice on the FCA website.

BE TRANSPARENTBe honest and open, focussing on your business and its daily objectives. Don’t embellish, and if you do something, make sure you actually do it and have the evidence on hand to prove it.

DEVELOP A CULTUREA culture that puts customers at the heart of the business has to be driven from the top down. Develop a plan that actively develops a culture that prevents any violations taking place in the first place.

TECHNOLOGYConsumer credit organisations are increasingly looking to technology to manage the demands of adhering to compliance requirements.One of the industry’s biggest challenges is managing the significant and growing number of Policies and Procedures that they are required to communicate to staff. One way to demonstrate Best Practice is to implement a bespoke technology based Policy Management solution that supports the key principles of the UKBA/FCPA and BSI 10500, ensuring a clear compliance audit trail for the benefit of the Board, Senior Management, Auditors and Regulators.All regulated firms are required to have robust governance arrangements and systems and controls in place to identify, monitor and manage risk. Enterprise Risk Management software is an effective way of managing Risk, controlling and mitigating the likelihood of an event taking place in the first place.Regulated businesses are also required to evidence the adequacy of access to and the security of its records, so that it can demonstrate compliance and adherence to statutory obligations.

Firms and individuals should consider any attestation requests with care. Giving an incorrect or misleading attestation could leave individuals and the firm open to enforcement action, so proceed with caution and consider the points below: • never feel pressured into signing without taking

advice (use legal privilege where possible) • notify the board and senior management of

any request immediately • seek to engage in dialogue with the regulator

about the level and timing of the attestation • request for time to carry out due diligence on

the subject of the attestation and for more time to tackle any remedial work

• firms should give serious thought to who is best placed to give the attestation. This might not necessarily be the CEO. The person with expertise on attestation could be a better choice

• keep records of any discussions, due diligence and concerns raised about the attestation

• remember, refusing to sign or making too many excuses may cause regulators to have suspicions and initiate investigations, with possible enforcement.

FEESFirms have to pay a fee when they apply for authorisation and then annual fees for every year they are authorised. The fee that a firm has to pay is proportionate to the size of the firm’s business and the type of authorisation. Firms with limited permission will have lower fees than those of higher risk firms that need full permission. For more information check the FCA website.

ONGOING COMPLIANCEOnce firms are fully authorised, the FCA will assign them to the appropriate supervision category, with high risk firms having dedicated supervisors and close attention. It has already made it clear that it will focus on areas of consumer credit activity with the greatest risks of consumer detriment and is carrying out studies in some areas as well as contacting firms about whom it has concerns. Senior management at consumer credit firms must ensure they are resourced and informed about compliance generally with FCA rules, and keep up to date with FCA speeches, newsletters and initiatives.

TOP TIPS FOR FCA SUCCESSMISS YOUR LANDING SLOT AT YOUR PERILDo not miss the application slot assigned, as your interim permission will immediately lapse and cannot be reinstated. The FCA has no scope to consider late applications and firms will be expected to cease trading until authorisation has been obtained.

While most consumer credit firms are aware the FCA regulates the industry and have secured permission to continue to write finance business, a worrying number are failing to comprehend the scale of work involved for the next step to securing full permission.One of the key differences between the FCA and Office of Fair Trading (OFT) is that firms and individuals must now demonstrate that their business models are fair and robust, and evidence how they will put the interests of consumers first.The FCA has enforced this new regime to help establish a minimum standard across the industry. When it took over regulation in April 2014, it brought some 50,000 consumer credit firms under its umbrella, but this number has dramatically fallen as companies fail to meet its tough criteria.

Tracey McDermott, Director of Supervision and Authorisations at the FCA believes that firms emerging successfully from the transitionary period will be those putting customers at the heart of their business. Commenting that the Consumer Credit industry has for too long been in the spotlight for the wrong reason, she said: “The real test for these lenders will be FCA authorisation where they will have to demonstrate exactly how much progress they have made if they want to remain in the market.”Consumer credit firms include credit card issuers, credit brokers, payday lenders, log book lenders, peer-to-peer lenders, pawnbrokers, and debt management and debt collection firms.Given the large number of firms involved, each activity has been given its own application period. The authorisations process began last October and will run until March 2016. Those with interim permission will have received written notification of their application period. It is critical that firms do not miss their allocated landing slot, failing to do so will result in severe penalties, such as being forced to cease all consumer credit activities and the sale of financial products that have outstanding finance. The FCA will come down hard on firms and individuals that carry on regulated activities in the UK without FCA authorisation, using a wide range of enforcement powers, including criminal prosecutions, action through the civil courts (injunctions, asset freezes, and winding up, bankruptcy) and published warnings.

10 11

THE REGULTORS RADAR

ARE YOUR READY FOR

CONSUMER CREDIT AUTHORISATION?

ON 25 MARCH THE MONEY ADVICE LIAISON GROUP (MALG) PUBLISHED ITS UPDATED GUIDELINES ON MENTAL HEALTH AND DEBT

The Good Practice Awareness Guidelines for Helping Consumers with Mental Health and Debt, now in their third edition, are designed to assist creditors, local authorities, debt collection companies, enforcement agents, advisers and all people working with those experiencing mental health conditions and debt, where their condition affects their ability to manage money.

The Guidelines, first published in 2007 and updated in 2009, have been produced by a small team working under the umbrella of the MALG Mental Health Working Party, made up of representatives from the advice sector, creditors and the mental health profession, with particular assistance from the Royal College of Psychiatrists.

The full guidelines are available online at www.malg.org.uk

Source: MALG Press Release

Going UpTHE FINANCIAL CONDUCT AUTHORITY (FCA) IS CONSULTING ON FEES FOR REGULATED FIRMS FOR THE 2015/16 FINANCIAL YEAR

These fees are used to cover the cost of the FCA’s regulatory activities, with fees for individual firms based on the areas of business they undertake.

The FCA’s annual funding requirement is £481.6m, up 8.4% from £446.4m in 2015/16.

38% of regulated firms will continue to pay the minimum fee which will increase to £1084 from £1000, the first increase since 2010.

The publication also sets out the proposed fees for the Money Advice Service (MAS) and Ombudsman Service, which are collected by the FCA on their behalf.

In addition the FCA has proposed fees for firms offering consumer credit, the pension guidance levy (which covers the cost of the government’s Pension Wise initiative) and the Payment Systems Regulator, which fall, outside the FCA’s annual funding requirement.

Firms can check their prospective fees for next year based on these proposals using the FCA fees calculator. The consultation closes on 18 May 2015, and the FCA expect to confirm changes to their fees in summer 2015.

Source: FCA Press Release

68% OF INTERMEDIARIES BELIEVE THE ECONOMIC RECOVERY HAS MADE SMALLER BUSINESSES AN ATTRACTIVE INVESTMENT OPPORTUNITY

The figure comes from new research from Albion Ventures (venture capital investors in the UK).

The research shows adviser optimism for smaller businesses is shared by their clients: 31% of Independant Financial Advisors (IFAs) has reported an increased number of enquiries over the past year from clients looking for investment opportunities in smaller, entrepreneurial businesses and 37% said they had received more client interest in opportunities to invest in firms that are well placed to capitalise on the stronger performing UK economy.

The contribution of UK SMEs to the economy as a whole cannot be underestimated. The European Commission’s SME Performance Review estimates that the Gross Value Add of SMEs is €531 billion or 51% UK Economy and that the sector has alo added more than 700,000 jobs since 2013.

Patrick Reeve, Managing Partner at Albion Ventures said: “This is an exciting time for young UK businesses with ambitions to grow. With favourable economic tailwinds and a supportive investor community small firms have a tremendous window of opportunity to make a mark.

Looking RosyA greater number of small businesses have increased their turnover, expanded workforces and reported profits over the last 12 months, according to new research published on 3 March 2015. These businesses forecast this positive trend will continue over the next year.

The Small Business Survey 2014 from the Department for Business, Innovation and Skills (BIS) is the nation’s most reliable source of evidence on enterprise.

The research of 4,355 small and medium sized firms that employ at least one person, found that:

• 78% reported they have made a profit or surplus in the last 12 months, back to 2007 and 2008 levels and up 6% on 2012

• 40% reported their turnover is greater now than 12 months ago, compared with 29% in 2012. Only 18% report declining turnover, down from 31% in 2012

• 51% expect to grow their turnover over the next year, up from 37% in 2012

• employers are recruiting more staff, with 22% of the firms taking on more staff over the last 12 months, compared with 19% in 2012

• one third of employers expect to increase their staff over the next 12 months (was only one fifth in 2012) and only 4% (1 in 25) expect to reduce staff (was one fifth in 2012).

Source: BIS Press Release

THE GOVERNMENT IS BRINGING IN TOUGH NEW LAWS AND BULKING UP EXISTING CODES OF PRACTICE TO TACKLE THE ISSUES OF LATE PAYMENT

New proposals to give business groups further powers to challenge unfair payment terms and practices on behalf of their members were unveiled on 3 February 2015.

The measures include:

• consulting on ways to tackle poor payment practices, such as by giving representative bodies greater powers to challenge grossly unfair payment terms and practices

• leading by example on public sector procurement

• new laws to increase transparency on the payment practices of large and listed companies and help change corporate payment culture

• toughening up the Prompt Payment Code

• giving the Groceries Code Adjudicator the power to fine supermarkets for breaching the Groceries Supply Code of Practice.

Representative bodies such as the Federation of Small Businesses (FSB) have played an important role in raising the profile of payment issues.

Source: GOV.UK

Nearly 286,000 SMEs have been affected by fraud, losing a total of nearly £8 billion during their time in business, according to new research by global information services company Experian.

Company fraud has more often been associated with corporate espionage, high profile scams and fraudulent activity in large enterprises. However, findings show there is an increasing need for UK SMEs to also protect themselves from card, cheque and identity fraud.

More than one in ten of UK SMEs have been the victim of company fraud. Over a quarter of SMEs with more than nine employees were the most likely to have fallen victim to fraud, while one in ten micro businesses (one to nine employees) have been victims of fraud.

Among UK SMEs that have been victims of fraud, the average amount of money lost was £2,627, but for some, the loss of money due to company fraud was much greater.

Source: Experian Press Release

More PleaseFrom Thursday 1 October 2015, the adult rate of the National Minimum Wage (NMW) will rise by 20 pence from £6.50 to £6.70 per hour, as recommended by the Low Pay Commission (LPC) in March 2015 this year.

The government has rejected the LPC’s recommendation for the apprentice rate. The new apprenticeship rate will be set at £3.30 and represents a rise of 57 pence, the largest ever increase in the National Minimum Wage for apprentices. By implementing a rate higher than the LPC’s recommendation, the government intends that apprenticeships will deliver a wage that is comparable to other choices for work.

From 1 October 2015:

• the adult rate will increase by 20 pence to £6.70 per hour

• the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour

• the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour

• the apprentice rate will increase by 57 pence to £3.30 per hour

• the accommodation offset increases from the current £5.08 to £5.35.

This is the largest real terms increase in the National Minimum Wage since 2007, and more than 1.4 million of Britain’s lowest paid workers are set to benefit.

Source: BIS Press Release

Company fraud costs UK SMEs nearly £8 billion

Playing Fair

SoundAdvice

Suggested Titles – An Attractive Investment, Sound Advice, A Stronger Performance

12 13

NEWS | SME’s NEWS | SME’s

Updated guidelines on mental health and debtAround the

Funding Maze

WEBSITE LAUNCHED TO HELP UK SMALL BUSINESSES NAVIGATE THE FUNDING MAZE

The independent service helps small businesses navigate their way around the increasingly complex world of alternative finance. It includes a simple funding comparison tool enabling users to compare a variety of alternative finance products from some of the UK’s top providers in just a few simple clicks. Focusing on products such as Peer to Peer (P2P) loans, invoice finance and crowdfunding, TheFundingCentre.com provides free and editorially unbiased information about the alternative funding options available to businesses.

David Stevenson, Founder of the Funding Centre comments: “Our mantra is that businesses should avoid the high street banks, as well as the finance broker sector, which we believe is as much of a problem as the high street banks. We believe businesses should go direct to the vast number of new alternative, online funding platforms. At the last count there were hundreds of platforms and products offering everything from short term working capital finance through to long term equity. The choice is huge, arguably there’s too much, and businesses need sound, editorially led, independent guidance to help navigate their way around this constantly evolving space.”

Breathing Space?PAYDAY LENDERS FAILING CUSTOMERS IN ARREARS SAY FCA

The payday industry is beginning to take a more customer focused approach to its business, but a review of the first twelve months of the Financial Conduct Authority’s (FCA) regulation of the sector has shown that too many firms have been failing to meet the requirements to treat customers in arrears fairly.

In March 2014, shortly before it took over responsibility for regulating consumer credit, the FCA announced it would carry out a thematic review into how payday lenders and other high cost short term credit providers collect debts and treat borrowers who experience financial difficulty. The review which covered 60% of the market revealed unacceptable practices from many lenders, including failures to recognise customers in financial difficulty, failure to direct people to free debt advice and firms offering inflexible repayment options.

However, the FCA’s work also showed that many firms have taken steps over the past 12 months to change behaviour and ensure that they are able to meet the FCA’s requirements. These include changes to senior management, training staff to deal with struggling customers and improving monitoring, compliance and managing risk.

Source: FCA Press Office

The Financial Conduct Authority has announced plans to ban opt-out selling in financial services markets. Opt-out selling is the practice of defaulting consumers into buying a product which they then have to opt out of, for example by using pre-ticked boxes to sell the consumer add-on insurance.

Following a market study into the general insurance add-ons industry last year, the FCA found that opt-out selling often results in consumers purchasing an insurance product they don’t need. Some consumers are not even aware they have bought an add-on.

Too often consumers are not able to make an informed decision on whether they need or want the insurance that is part of the opt-out package. The FCA will consult with the industry on the proposals which also include introducing guidance for firms so they can give consumers information about add-ons at the right time in the sales process.

Source: FCA Press Office

CONSUMER CREDIT AND THE FCA - ONE YEAR ON

The Financial Conduct Authority’s (FCA’s) chief executive, Martin Wheatley, has marked one year of FCA consumer credit regulation with a speech to Money Advice Scotland.

Martin said “We are in a far more promising place than we were 12 months ago. There is now a sense that we are in the middle of a period of significant change, with the large majority of the industry recognising the importance of moving things forward. The challenge, of course, is to move the rest of the industry forward with the same enthusiasm and pace.”

You can read the full speech here: http://tinyurl.com/o454rxe

Source: FCA

FCA business plan & risk outlookThe FCA has published its business plan for 2015/16 and its FCA Risk Outlook (this year included within the same document). The FCA intends to consult later in 2015 on changes to CONC on creditworthiness and to clarify its expectations of firms. Similarly, it will seek views on cold calling and look at quotation searches with a view to allowing consumers to shop around more easily. Additionally, it is to implement the recommendations in the Competition and Markets Authority’s final report on the payday lending sector with respect to price comparison websites. There will also be a market focused work programme on responsible lending, collection of unsecured debts, and staff remuneration/incentives. Separately, the FCA will look into how the mortgage market is working, in particular over barriers to competition and the ability of consumers to switch or apply for credit. Full details can be found at: http://tinyurl.com/kflhxgt

Source: FCA

Comparing PricesTHE COMPETITION & MARKETS AUTHORITY (CMA) HAS PUBLISHED ITS FINAL REPORT ON THE PAYDAY LENDING MARKET

It includes its decisions on measures to increase price competition between payday lenders and to help borrowers get a better deal.

The measures follow the conclusion of a twenty month investigation.The group published its provisional findings in June 2014 and then consulted on its intended proposals the following October.

Online payday lenders will be ordered by the CMA to publish details of their products on at least one price comparison website (PCW) which is authorised by the Financial Conduct Authority (FCA). To ensure that they operate to appropriate standards, the CMA has recommended to the FCA that authorised PCWs should provide customers with clear, objective and comparable information on all potential loan costs, in particular the total amount payable, and have the ability for customers to compare different loans by searching easily on the most relevant features such as loan amount and duration.

Online and high street payday lenders will be ordered by the CMA to provide existing customers with a summary of their cost of borrowing.

Source: GOV.UK

FCA PUBLISHES THEMATIC REVIEW ON GOVERNANCE OVER MORTGAGE LENDING STRATEGIES

The FCA has published a thematic review (TR15/4) setting out its findings on governance over mortgage lending strategies. Although conduct issues appear on the agenda of all firms the regulator does not consider that in practice these are embedded in the way they conduct business. For example, while customer outcomes may be considered at the product development stage there is less evidence that this happens at other stages of the product life cycle. Details can be found at: http://tinyurl.com/q2yha9d

FCA UPDATE ON EXEMPTION FOR INSTALMENT CREDIT

The FCA has published updated information on the revised exemption for instalment credit which came into force on 18 March 2015. The Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) with respect to exempt agreements. In relation to the exemption under article 60F(2) which concerns exemptions relating to the number of repayments in a borrower/lender/supplier agreement for fixed credit, the maximum number of payments permitted within 12 months is increased from four to 12. This will be helpful to insurers allowing consumers to pay annual premiums by instalment which may not now need to apply for authorisation for consumer credit.

Source: FCA

14 15

NEWS | REGs NEWS | REGs

THREE NEW CHAIRS FOR THE FINANCIAL CONDUCT AUTHORITY’S INDEPENDENT PRACTITIONER PANELS HAVE BEEN APPOINTED.

The appointments, which come into effect from 1 April 2015, are:

FCA Practitioner Panel: Alison Brittain, Group Director of Retail, Lloyds Banking Group

FCA Markets Practitioner Panel: Robert Mass, Head of International Compliance and global head of Securities Division Compliance, Goldman Sachs

FCA Smaller Business Practitioner Panel: Clinton Askew, Director, Citywide Financial Partners

Each appointment is for a term of two years.

Alison Brittain, Robert Mass and Clinton Askew will succeed Graham Beale, Paul Swann and Andrew Turberville Smith respectively.

Source: FCA Press Office

Credit Summit 2015: FCA doesn’t want a smaller market

A New Chapter

FCA proposes an end to opt-out selling of insurance add-ons

The Financial Conduct Authority (FCA) has told delegates at Credit Today’s Credit Summit it doesn’t want a smaller consumer credit market, amid increased pressure on the industry.

In his keynote speech Christopher Woolard, Director of Strategy and competition at the FCA, said the regulator’s objective “isn’t to achieve a smaller market. It is towards a sustainable one. In the short term, as we find we cannot reconcile bad practices in some markets with our standards, we expect to see a reduction in the number of firms.”

Woolard’s wide ranging speech covered high cost credit, credit cards, a debt management firm review and a sharp focus on affordability. He also addressed the FCA’s looming thematic review of DCA staff remuneration and another review of unsecured debt collection. He told the audience: “We are looking at incentives. It’s a key aspect that does have an impact on consumer experience.”

Speaking generally about the consumer credit sector, he revealed that the FCA has received nearly 30,000 calls to its contact centre from consumers, along with information from trade bodies and consumer organisations about harmful practices that threaten the market’s integrity.

After stating that it was clear that short-term, high-cost credit providers had not been ready for regulation, he emphasised that the FCA will take a sharp focus on affordability.

Source: Credit Today

A More Promising Place

Snippets

FOS PUBLISHES PLANS AND BUDGET FOR 2015/16

The Financial Ombudsman Service has published its plans for the year ahead, following carrying out a consultation in January 2015. To view, go to http://tinyurl.com/pahafhg

Source: FOS

PSR CONFIRMS REGULATORY APPROACH AND POLICY WORK PROGRAMME

The Payment Systems Regulator has announced how it intends to regulate payment systems in the UK and also published its work programme for the year ahead, which includes two market reviews looking at ownership and competitiveness of infrastructure provision, and the supply of indirect access to payment systems. For further details, visit http://tinyurl.com/o3ehbwh

Source: PSR5

HM TREASURY RESPONSE ON DATA SHARING IN BANKING

HM Treasury has published a response to its call for evidence on the benefits of data sharing and open data in banking. Despite financial institutions highlighting the risks from publishing more open data in banking, which largely concern the security of data and the residual risk of identifying individuals (from anonymised or aggregated personal data), the government wishes to deliver an open (Application Programming Interface) API standard in UK banking.

Source: HM Treasury

On 16 March, the Financial Conduct Authority (FCA) confirmed its approach to improving individual responsibility and accountability in the banking sector by publishing feedback which sets out how the FCA will implement the Senior Managers Regime (SMR) and provides further information on the FCA’s plans for the Certification Regime (CR) and new Conduct Rules

The new framework comprises two regimes, a ‘Senior Managers Regime (SMR)’ and a ‘Certification Regime’, which aim to encourage individuals to take greater responsibility for their actions and make it easier for both firms and the regulators to hold individuals to account. In order to give firms as much time as possible to prepare for the changes, the FCA is publishing a set of near final rules on the new SMR, together with a steer on the policy intentions for the whole regime, including the Certification Regime and the application of the Conduct Rules.

The new regimes are also underpinned by a new set of Conduct Rules, applying to most staff within relevant firms.

The FCA has also published guidance consultation on ‘Risks to customers from performance management at firms’ relevant to all firms that deal with retail consumers.

The FCA expects all firms who deal with retail consumers to read the report and take action to ensure they are managing this risk.

Source: FCA Press Release

NEWS | BANKs

Happy Birthday? SIX YEAR ANNIVERSARY OF 0.5% INTEREST RATES

Nick Hungerford, Chief Executive and founder of Nutmeg, comments: “Savers have been feeling the heat for a long time now, and the fact that the Bank of England has kept interest rates stuck at an all time low for the last six years simply fuels the fire. Inflation has also been taking its toll on the value of money, and as a result it feels almost impossible to get worthwhile returns from cash at the moment.

“The Government may have taken steps to encourage people to save, such as raising the ISA allowance to £15,000 per tax year, but more needs to be done.

“Now is a good time of year to hunt for the best deal if you’re saving in cash, as providers are likely to be offering their best cash ISA rates in the run up to the end of the tax year. Those searching for above inflation returns could look to investing as another option. For those willing to take bigger risks with their capital, the stock market can offer the potential for far greater returns that you could achieve from cash. But anyone doing so needs to make sure the fees are as low as possible, while remembering that with investments capital is at risk.”

Source: Money4Media

BANK CLOSURE PROTOCOL

As the protocol for bank branch closures is announced, new Which? research shows the importance of banks introducing alternatives for customers.

• 41% still use the local branch of their high street bank at least once a month

• 37% say it would inconvenience them if their local high street bank branch closed and 30% say they would consider switching banks showing the importance of introducing alternatives for customers

• the most popular alternatives for consumers, if their high street bank closed, are:

• 41% would like ATMs to provide other services

• 39% would like the bank to operate in another location e.g. supermarket

• 35% banking provided in the Post Office

• 35% shared branches.

• In rural areas, banks providing services at the Post Office or in another location are the most popular alternatives.

Which? executive director, Richard Lloyd, said:

“We expect the banks to stick to their word and ensure all consumers can access vital banking services, no matter where they live. Next year’s independent review of this agreement will be an important test of the banks’ commitment to regaining the trust of consumers.”

Source: Money4Media

Out in the Cold

A Snails Pace? MORTGAGE AFFORDABILITY ASSESMENTS SLOW DOWN APPLICATIONS

The latest research from Equifax, the credit information provider, reveals that 59% of people who are either considering, or are in the course of applying for a mortgage believe that the obligation placed upon mortgage lenders to assess their ability to repay will slow down the application process. 32% of those who have yet to apply also said they would find it fairly difficult to obtain evidence of all the expenditure information they believe a lender needs to assess a mortgage application.

As figures suggest house buying is at its busiest during the spring, 69% who responded to the survey also expressed concern that more detailed affordability checks would affect the amount they could borrow. 40% are also worried about the time it will take to complete their mortgage application. The responsibilities placed upon lenders, which came into effect in April 2014, as a result of the Mortgage Market Review, place even greater onus on the lender to assess an applicant’s ability to repay. The applicant’s credit history is likely to play a crucial role in that assessment, alongside other information gathered as part of the application process.

Source: Harrison Sadler

Lending in 2014:

• overall for 2014, home owner house purchase totalled 676,900 loans, up 11% on 2013 and the highest annual lending level since 2007. This meant £112.7 billion was advanced in total in 2014 for house purchase, up 19% on 2013 and again the highest annual value since 2007

• first time buyers in 2014 were advanced a total of 311,500 loans for house purchase, up 15% on 2013. The value of these loans (£45bn) also increased by 24% on the previous year

• home movers were advanced a total of 365,400 loans for house purchase in 2014, up 8% on 2013. The value of these loans (£67.6bn) also increased by 16% on the previous year.

• total number of loans for remortgage was 303,100 in 2014, down 6% compared to 2013. This totalled in value £46 billion, which was up 2% on 2013

• total gross buy-to-let lending for 2014 totalled 197,700 in volume, which was up 23% compared to 2013. This totalled £27.4bn in value, which was a yearly increase of 32%.

Source: Council of Mortgage Lenders

In February, the Financial Ombudsman Service released the latest six monthly complaints data relating to individual financial businesses, including the high street banks and biggest insurers.

The data published on the ombudsman’s website, details complaints received and resolved by the ombudsman service between 1 July and 31 December 2014. This includes:

• the number of complaints received about named individual businesses

• the percentage of resolved complaints the ombudsman upheld in the consumer’s favour against those businesses.

The figures published show that the ombudsman took on a total of 161,649 new cases in the second half of 2014.

Of the total cases referred to the ombudsman in the second half of the year, payment protection insurance (PPI) made up 65%, with a total of 104,877 new PPI complaints.

For complaints about financial products other than PPI, the total number of cases referred to the ombudsman remained at a similar level throughout the year (57,310 in the first half of the year compared to 56,771 in the second). However, banking complaints increased by 8% and investment cases by 4%.

The average uphold rate (where the ombudsman found in the consumer’s favour) over the six month period was 52%, ranging from 4% to 98% across the individual businesses.

ON 6 APRIL, THE INFORMATION COMMISSIONER WELCOMED CHANGE TO THE LAW AROUND NUISANCE CALLS AND TEXTS, WHICH HE SAYS WILL MAKE A DIFFERENCE

The law change makes it easier for the Information Commissioner’s Office to issue fines to companies that break the law.

Previously, the ICO has had to prove that a company caused substantial damage or substantial distress making nuisance calls or sending spam text messages. But from 6 April, the ICO will just have to prove that the company was committing a serious breach of the law (Privacy and Electronic Communication Regulations).

The law allows companies to make marketing phone calls without prior permission, but they must first check the Telephone Preference Service, which lists individuals who have opted out of marketing calls. Companies need permission before they can send marketing text messages, and should always give details of how the recipient can opt out of any future messages.

The ICO received 175,330 reports of nuisance calls and texts from concerned people in 2014. Despite the high barrier, the ICO has been able to issue £360,000 of civil monetary penalties for nuisance calls and texts in the past year. In the most recent fine, issued last week, a personal injuries claim company was fined £80,000 for making nuisance calls, including reportedly calling one household 470 times.

16 17

NEWS | BANKs

FCA confirms approach to improving responsibility and accountability in the banking sectorSnippets

Nuisance calls and texts law change

Ombudsman publishes latest complaints data on individual financial businesses

CML 2014 Lending Summary

Budget 2015: A Summary1. The UK had the fastest

growth in the G7 in 2014

2. Debt will be falling as a share of GDP in 2015-16

3. The tax-free personal allowance is being increased in April 2017, to £11,000

4. A new Personal Savings Allowance will take 95% of taxpayers out of savings tax altogether

5. Introducing the Help to Buy ISA. Every £200 people save towards their first home, the government will put in an extra £50, up to a maximum bonus of £3000

6. People will have complete freedom to take money out of an ISA and put it back in later in the year

7. £1.25 billion for childrens mental health services

8. Cancelling the fuel duty increase scheduled for September

9. Cutting beer duty for the third year in a row

10. Up to five million pensioners will be given the freedom to sell their annuity for a cash lump sum

11. Charities will be able to claim more gift aid on small donations

12. Farmers will have more time to average their profits for income tax

13. Abolishing the annual tax return

14. Support for all regions across the UK

15. Making sure banks pay their fair share

17. Faster broadband and better mobile networks

18. Introducing postgraduate research loans

19. Further investment in science and innovation

20. The government will consult on a tax relief for local newspapers

Source: GOV.UK

INDEPENDENT REVIEW OF MAS

HM Treasury has published the independent review of the money advice service. The review can be found here: http://tinyurl.com/kco5m2p

In addition to this HM Treasury has published its response to the review, MAS has published a response to the review as has the Financial Conduct Authority.

Source: HM Treasury

PERSONAL DEBT TO HIT £2.5 TRILLION BY THE END OF THE DECADE

Adults in the UK will owe an average of over £47,000 by 2020, according to new analysis by The Money Charity.

The UK’s leading financial capability charity called on all parties to make financial capability a key policy priority after next month’s election or face a personal debt crisis.

Figures from the Office for Budget Responsibility, released alongside the Budget, show that total personal debt is projected to reach £2.495 trillion by Q1 2020.

Source: The Money Charity

Figures released on 6 March by the Finance & Leasing Association (FLA) show that consumer finance new business fell by 1% in January 2015 compared with the same month in 2014, but remained 7% up in the twelve months to January. Point of sale car finance grew by 5% in January compared with the same month a year earlier, but there was a modest fall in retail store and online credit of 5% over the same period. While the value of second charge mortgage new business grew by 13% in January, the number of new second charge mortgages fell by 10% in the same period.

Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “FLA’s consumer finance sectors reported a relatively quiet start to 2015, but our latest research suggests that UK gross consumer credit will grow by about 7% in 2015 as a whole.”

Source: FLA News Release

Money Management: The MythsOn 26 March, The Money Advice Service launched an innovative new evidence hub which brings together up to the minute evidence on what really works in helping people manage their money better.

The new ‘evidence hub’ is designed to help organisations learn from the success or failure of projects in the past.

In addition, the Service is leading the development, with partners in the public, private and voluntary sector, of a Financial Capability Strategy for the UK to help improve habits towards money.

Between now and the final Strategy, the Service will be stepping up its role in leading the drive for greater financial capability, as recommended by Christine Farnish’s review of the Money Advice Service published last week. Next steps will include a summit to bring together funders of financial education to share best practice and identify gaps, and the launch of pilot programmes to help parents teach their children about money.

Source: Money4Media

SAVERS PUT ASIDE MORE MONEY DURING 2014 THAN AT ANY TIME IN THE PAST DECADE ACCORDING TO DATA FROM THE LATEST NS&I QUARTERLY SAVINGS SURVEY

Monthly savings were 9.25% higher in 2014 than 2013, rising to £113.77 per month, equivalent to 8.52% of average take home pay. This is the highest share of monthly pay to be saved since the survey began in 2004. It reached its lowest point at 5.82% in spring 2005.

What are people saving for?

• 74% of those who put money aside each month were doing so without a goal in mind. 49% of those aged 25-34 and 41% of those aged 16-24 were saving to cover housing costs

• of the 26% who were saving with a goal in mind, 42% were looking forward to a holiday or celebrating a special occasion while 35% said they were saving to cover housing costs which includes saving for a deposit.

Despite the increased levels of savings, almost a third of savers questioned did not believe they had enough money set aside in case of an emergency.

The survey also showed that 50% of savers with children under 15 think that they had the savings in place to cope with an emergency. In addition, 32% of those approaching retirement age (55 – 64) said they had less than £1,000 in savings with one in ten (18%) suggesting they had none.

Source: NS&I Press Office

0n 1 April, The Money Charity announced that due to the overwhelming support it has received, it has been able to reverse its planned closure. But it warns that government, industry, and the Money Advice Service (MAS) must act to secure the long term future of the financial capability sector.

The charity has been able to reach an agreement with its funders that guarantees its existence for at least the next three years.

Since 2010, the charity has delivered free, interactive financial education workshops to over 115,000 young people in schools across the UK, and its Student Moneymanual has reached over half a million students this year alone. It has also developed innovative workshops to help adults feel positive about and stay on top of their money. As well as this it publishes its widely used Money Statistics, and works with the industry to improve practices and outcomes for consumers.

At present there is no funding from central government or the MAS for financial education for individuals of any age, despite the topic’s inclusion in the national curriculum and MAS’s statutory objective of enhancing the financial capability of the UK.

Source: The Money Charity

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NEWS | EXTRAs NEWS | EXTRAs

THE CONSUMER RIGHTS ACT HAS RECEIVED ROYAL ASSENT

The Trading Standards Institute (TSI) wants to help businesses understand how their rights and responsibilities have changed under the new legislative framework. They have developed reference tools through their business comparison website. Businesses have from now until 1 October to implement and educate staff about the changes.

The Consumer Rights Act replaces eight existing laws, including the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982. It also:

• outlines a clearer route for consumers interested in understanding their rights and the remedies they have if they feel good/services fail to do what was promised

• clarifies when terms and conditions can be considered unfair

• clarifies the periods for repair, replacement and refunds related to both goods and services

• simplifies the process by which small businesses can take legal action against bigger companies that are breaking competition laws.

The Business Companion guidance on the Act is split from 1 October 2015.

Source: Department for Business, Innovation & Skills

In Love with Borrowing?The average UK household is set to owe close to £10,000 in unsecured debt by the end of 2016, more than ever before in cash terms, according to PwC’s latest report on the Consumer Credit market, Precious Plastic: How Britons fell back in love with borrowing, published 23 March, which found:

• 2014 saw unsecured debt rise by 9% to an all time high, in cash terms, of £239bn or close to £9,000 per UK household

• households are more confident than at any time since the survey began about staying on top of their future debts, with less people worried about job security and pay rises than before

• despite consumer’s confidence in managing their debt, as the total household debt (including secured debt) to income ratio heads towards 172%% in the coming years, exceeding its previous peak in the run up to the financial crisis, affordability of this debt pile may come into question

• a 2% increase in the rates households pay on their total debt (including secured debt) would require them to find an additional £1,000 a year, just to cover the additional interest costs

Total outstanding unsecured borrowing grew by nearly £20bn in 2014 or 9%, its fastest rate of growth in at least a decade, to reach £239bn or close to £9,000 per household last year, surpassing, in cash terms, its pre-financial crisis peak.

Source: PwC

Highest average savings for a decade

Countdown change by 1 October

Consumer finance up by 7%

Snippets

UK’s leading financial capability charity back from the brink

The Claimant, NRAM PLC, brought the action against the Defendants to effectively enable the Court to resolve a dispute between NRAM and potentially over 40,000 other customers in similar circumstances to the Defendants. The key issue under consideration concerned whether or not the Defendants, who had entered into loan agreements which while not regulated by the Consumer Credit Act were documented as if they had been, were relieved from liability to pay interest during the period in which NRAM was ‘in breach’ of a duty which, had the agreement been regulated, would have arisen under section 77A CCA. Finding in the Defendants’ favour, NRAM is subsequently facing potential losses of £258 million.Between 1999 and March 2008, NRAM utilised the same paperwork for both regulated and unregulated agreements. This was true of both the loan agreement itself and the wider suite of pre-contractual and contractual documentation. The question in front of the Court was whether the rights and remedies available under the CCA, or protections equivalent to such rights

and remedies, were imported into such agreements through such statements being made as a matter of contract, even though the agreements themselves fell outside the statutory scheme. The particular circumstances under which NRAM failed to comply with its ‘regulatory duties’ was in complying with s.77A CCA. Despite providing the appropriate redress to those clients with regulated agreements for this error, NRAM did not provide such redress to those customers with unregulated agreements, even though the paperwork documenting these agreements stated that customers on unregulated deals would benefit from such rights. Mr Justice Burton took the view that whether or not it was a regulated agreement, on the proper construction of the agreement it was to be treated as if it were regulated, even though it was not a regulated agreement in its own right.NRAM is considering whether to seek permission to appeal in regard to this case. Should it choose to do so, this case will certainly be one for lenders to watch throughout 2015 and potentially beyond, if it passes through both the Court of Appeal and to the Supreme Court.

The new charging regime was brought into force just seven weeks after a consultation on proposals to increase court fees in a number of areas, including money claims (specified and unspecified), commercial proceedings, hearings (fast and non-fast track) and divorce proceedings was held. These proposals faced opposition from senior judiciary and several organisations and representative groups. The MoJ last increased these fees as recently as April, 2014. Whilst the Law Society has announced that it intends to challenge the increase, the increases came into force as of 9 March and it would be imprudent to assume that the challenge will succeed at all or in part until any further announcement is made.

One possible consequence of these increases is that small businesses chasing late payments and other debts may be disproportionately hit, deterring many from pursuing money they are owed. The Bar Council had warned against this ‘tax on justice’ being proposed and stated during the consultation process that ‘small businesses which were already being crippled by late payments from customers who were often larger businesses would either not be able to pursue a claim or risk paying a hefty court fee which could be as much as £10,000’. These increases could

place a prohibitive levy on claimants who have to go to court to recover their debt and could penalise numerous businesses and individuals seeking redress.

To make sure that access to courts and tribunals is available for individuals who have difficulty paying a court or tribunal fee a system of fee waivers and reductions, known as the remissions system, is available. The fee remission system allows access to court and tribunal services free of charge (a full remission) or at a reduced rate (a part remission).

The risk remains that many could be priced out of court.

The new fee increases for money claims mean:

• the fee for claims from £1 - £9,999 will remain unchanged

• the fee for claims from £10,000 - £199,999 will be five per cent of the claim

• the fee for claims of £200,000 and above will be fixed at £10,000

• there will be a 10 per cent discount on fees for claims from £10,000 - £99,999 filed electronically.

ANSWER:This question will depend on what unregulated ‘lending’ you are specifically dealing in.

Guidance given by the FCA indicates that commercial lenders, including those offering commercial mortgages, factoring companies and lenders that finance commercial transactions, will all need to register with the FCA for AML and CFT supervision purposes. In addition, companies that provide finance leases will also need to be registered.

Depending on the type of loan, firms should also be aware of other activities that are caught by the Regulations. For example, if they are offering lending in respect of goods and are prepared to accept cash over the sum of $15,000 (approximately £11-12,000) then they will need to be registered with and supervised by HMRC. Once registered, these firms are subject to a risk based supervisory approach to monitor their compliance with the Regulations. These regulations give effect, under UK law, to the EU Third Money Laundering Directive.

However, it is also worth noting that registering with the FCA for AML and CFT supervision purposes is not authorised in the same sense that a firm engaging in regulated activities is authorised. In fact, the FCA even makes this clear distinction in the terminology it uses; a firm such as yours ‘registers’ with the FCA and is not authorised. This means that disclosures such as ‘authorised by the FCA’ should be used on stationery and that customers will not have access to the Financial Ombudsman Service as a route of recourse.

A firm captured by these circumstances is called an Annex I Financial Institution and is entered onto a public register of Annex I firms once registration is complete. To register, firms must complete an Application for Registration as an Annex I Financial Institution, which requires the usual standard details and such as company information, nature and size of the business, and so on. There is also a registration fee of £100.

Tim AnsonLegal Adviser Asset &

Consumer Finance DWF

Harpreet Gundara McClure Naismith

Joanne DavisCCTA Council Member

On 10th December 2014, the High Court handed down judgment in NRAM PLC (previously Northern Rock PLC) -v- McAdam. The case generated a number of media headlines, and is particularly pertinent to people who borrowed from the now defunct Northern Rock. It also has significant implications for lenders.

The Ministry of Justice (MoJ) increased court fees for issuing money claims in England & Wales, with effect from Monday 9 March 2015. These increases are significant and we understand that the MoJ is also consulting on fee increases for possession claims, applications without notice or consent and applications on notice with consent.

NRAM -v- McAdam [2014] EWHC 4174 Comm

England & Wales Court fees increase – Important change announced

NEWS

20 21

LEGAL | NEWS

Q&A

QUESTION:I am a lender dealing only with exempt consumer credit business so I will not be applying for full authorisation, but will I still need to comply with Anti-Money Laundering regulations, and do I need to be authorised for this? If I do need to be authorised, how do I go about obtaining this?

23

YOUR CCTA

THE FUTURE OF CONSUMER CREDIT, COMPETITION, REGULATION AND CONSUMER PROTECTIONWestminster Forum Projects

Tuesday, 2 June 2015 - Central LondonTo find out more go to events at: www.westminsterforumprojects.co.uk

Guests of Honour: Philip Salter, Head of Consumer Credit Supervision, Financial Conduct Authority and Adam Land, Project Director, Payday lending market investigation, Competition and Markets Authority. Delegates at this seminar will consider the future framework for consumer credit regulation in the UK. It is timed to assess the impact of forthcoming reforms to the consumer credit regime expected in 2015, including the implementation of a fully revised consumer credit authorisation framework, and the introduction of a cap on the total amount that high-cost short-term credit lenders can charge. The seminar will also provide a timely opportunity to consider the final report of the Competition and Market Authority’s payday lending market investigation.

Delegates will discuss how an evolving regulatory framework will impact on the sector, with particular reference to regulatory supervision, enforcement mechanisms, authorisation and the prospects for market competition. Attendees will also consider the priorities ahead for raising consumer awareness and providing independent debt management advice. This conference will bring together policymakers and regulators with a wide range of stakeholders, including consumer credit license holders, debt management firms, charities, business groups and consumer bodies.

CCTA 2015 Training Courses

CCTA 2015 Conference Sponsorship Opportunities Brochure Available NowOur 2015 Conference Sponsorship Opportunities Brochure is now available to download online. In it you will find:

complete package options prices & comparison tables floor plan confirmation form

CCTA 2015 Marketing Opportunities Brochure Available NowOur 2015 Marketing Opportunities Brochure is now available to download online. In it you will find details of:

missing link - online advertising consumer credit magazine advertising regulatory inform sponsorship annual conference sponsorship briefing seminar sponsorship sponsored articles e-shot campaigns

To view visit:www.ccta.co.uk

To view visit:www.ccta.co.uk

CCTA 2015 Briefing SeminarsOpen to members and their guests cost £65 (exc VAT)Our regular Briefing Seminars aim to provide in depth information and clarity around current major issues facing our industry. They offer an open debate forum with formal presentations, Q & A sessions and legal and regulatory updates. A networking lunch provides members and their guests the opportunity to meet speakers, CCTA representatives and like-minded professionals. Delegates receive a full briefing pack containing information and presentations from the event.

The next events, sponsored by Oyster Bay Systems will be held in London on the 3 June and Leeds on the 4 June. For details and booking details, login and visit our products and services page. http://www.ccta.co.uk

Bookings open in May: www.ccta.co.uk/content/conference_home_page.aspx

CCTA 2015 Annual ConferenceMAKING THE FCA CUT

As the dust settles on the enormous fundamental changes you have already survived, it is not a time to stand still. Companies believing this disruption is a passing phase are in for a rude awakening. This is a new way of life. To move forward we need to keep our heads, and embrace the fluid regulation that is now the DNA of consumer credit.

To bring order out of chaos, we need to focus on leadership. Integrity, fair practice and transparency are key to an ongoing relationship with both our customers and our regulator. The CCTA 2015 conference will unlock a clear strategic direction for businesses and their leaders. We will yard stick best performance, clarify the market position, and focus on the positives on the ever widening horizon of our new landscape.

venue: Nottingham Belfry Hotel dates: 4 and 5 November 2015 prices: from £199Bookings open in May: www.ccta.co.uk/content/conference_home_page.aspx

New Members...

New Members...

UCSL Chester

Henry Howard Finance Newport

D & D Leasing UK London

Different Money Cheshire

Creative Finance Group London

Affiniti Digital Media Surrey

Paymaster (1836) Reading

Pennine Credit Services County Down

1st Stop Car Finance County Durham

Norton Financial Services Rotheram

Valley Finance Belfast

Rural Finance Wrexham

H & H Finance Carlisle

PRA Group UK Kilmarnock

Watchtower Investments Middlesex

Fowlersfinance.com Newcastle

Asgard Financial Services Belfast

Perinta London

Sales Aid Finance England East Sussex

WO Funding Stafford

Progressive Loans Manchester

Glenmore Capital London

22

4 venues:

Manchester

London

Leeds

Birmingham

5 courses:

Getting FCA Authorised

FCA Approved Persons Regime

FCA Treating Customers Fairly Regime

Complaint Handling, Reporting & Publication

FCA Supervision & Reporting

discounts:

3-4 bookings 10% 5-6 bookings 15% 7+ bookings 20%

prices:

members £290 non-members £345

Dates, details and bookings at: www.ccta.co.uk/content/training_home_page.aspx

25

MEMBER NEWS

Loans 2 Go Ltd and Hermes Property Services Ltd MergeIt has been announced that the businesses of Loans 2 Go Ltd and Logbook Loans (Hermes Property Services Ltd) have merged. Effective 23 January 2015, the companies will conduct business together under the Loans 2 Go brand with offices in both London and Rochdale.

The new business will make use of the 78 existing Loans 2 Go branches as well as having a number of mobile representatives, enabling it to reach customers across all areas of England, Wales and Scotland.

Matt Campbell, Chairman of the Board said: “We are excited that this merger will further strengthen our ability to provide excellent customer service and ensure that customers remain at the heart of the business at all times. With greater geographical reach and shared resource, we expect the business to continue to grow and flourish over the coming months and years, letting us help more customers than ever before.”

Dreams Telesales Team using Sign Solo Connect from BonafideeThe UK’s leading bed specialist, Dreams, now uses Bonafidee’s Sign Solo Connect service, their new unrivalled e-signature solution within its Telesales channel.

Dreams Telesales’ customers can now apply for credit online and receive an answer instantly on whether they have been successful in their application. It is fully automated using Bonafidee’s Sign Solo Connect service. Sign Solo Connect is integrated into Dreams’ existing business applications with customised branding through Bonafidee’s enterprise API.

This new facility integrated into Dreams Telesales’ system provides a speedier signing process for Dreams’ customers with instant turnaround in e-signature and also demonstrates a secure unrivalled double signing mechanism. By going through this process, the signatory knows exactly what they are doing and provides Dreams with assurance that the agreement is more secure than previous methods.

Noddle says ‘thanks a million’ to its customersNoddle the free for life credit report service has announced it has reached one million users, and is celebrating the fact it is helping these customers save a total of £80m a year in subscriptions fees.

Noddle, part of the Callcredit Information Group, which offers consumers unlimited free for life online access to their credit report, has seen the number of users double in size over the last year alone. Evidence that more people are accessing their credit report as a means of managing their financial health and the growing popularity of Noddle in helping them to do this.

The significant increase in user sign ups has been seen across the UK with those living in the South East leading the way with 231,736 consumer savvy customers signing up to use Noddle, an increase of over 500% based on previous figures.

Kingways Supports British Business Bank Investments Kingsway investment reaffirms commitment to support asset and lease finance providers British Business Bank Investments Ltd, the commercial arm of the British Business Bank, is investing £5 million in Kingsway, a Cheshire based asset finance specialist. The investment is expected to increase Kingsway’s leasing capacity by up to £10 million.

This investment is the latest in a series of commitments from British Business Bank Investments Ltd in the leasing and asset finance space. These recent investments demonstrate how British Business Bank is delivering on its promise to provide regionally based commercial business lenders with additional capital to lend to their local businesses.

Adrian Anthon, Managing Director of Kingsway, commented: “The north west is home to a thriving start up and small business community which we have been supporting for over ten years. The new British Business Bank Investments Ltd facility will enable Kingsway to significantly increase our lending to small businesses both in the north west and further afield.”

24

Blue Motor Finance use Boanfidee’s e-signatureBlue Motor Finance now use Bonafidee’s e-signature solution to offer customers the option of signing their credit agreement online in a matter of minutes. Blue needed to offer the best service to dealers with the capacity to release a car as soon as a customer had signed an agreement.

Bonafidee’s e-signature helped streamline Blue’s closing process and ensured dealers received funds more quickly. The solution reduced the buying process considerably. With Bonafidee’s e-signature a person’s identity can quickly be checked at the same time, thereby ensuring that it is the correct person signing the document. Comprehensive, detailed ID checks can be undertaken using Bonafidee against UK credit referencing agencies, passports, driving licences and bank/credit cards.

Hampshire Trust Bank reaches lending landmark

Hampshire Trust Bank’s Asset Finance division has announced that it has reached a significant milestone by completing £5m worth of asset finance transactions in March alone. The rapid progress of the team was further highlighted as it surpassed its 1,000 asset finance deal since it began operating last year.

These are the latest landmarks in the challenger bank’s growth since its inception in May 2014, and are set against a backdrop which has seen the Asset Finance division of the bank grow by 85% this year already.

The Asset Finance team are specialists in both hire purchase and leasing, typically managing deals ranging from £5k to £200k, offering finance for cars and light commercial vehicles for business or private use, as well as a range of plant and machinery.

Hampshire Trust Bank launches block discounting service

On 20 April 2015, Hampshire Trust Bank, a challenger bank specialising in lending to SMEs, announced that it is launching a new block discounting service.

This is the latest business finance service to be introduced by the bank which specialises in the provision of asset, commercial and property

finance, and follows an impressive growth trajectory since their inception in May 2014.

The block discounting service will enable the bank to provide UK finance companies with significant funding for onward lending, helping them to leverage their lending capabilities.

The team will be headed by Andrew Dearden, Director of Block Discounting.

AndrewDearden

Chris Welch

Michelle HighmanChief Executive,

The Money Charity

| FEATURE

Add that to the half of people who don’t make a personal budget and the fact that one person every five minutes and 55 seconds becomes insolvent, and it’s clear that something has to change in the way we manage our money.As the UK’s leading financial capability charity, we believe that staying on top of your money means you are more in control of your life, your finances and your debts, reducing stress and hardship, and that being on top of your money increases your wellbeing, helps you achieve your goals and live a happier more positive life as a result.Earlier this year, we came extremely close to shutting down due to lack of funds, in fact in March our trustees took the difficult decision to close the charity.We’re delighted that since then we’ve reached an agreement with our funders. We receive no money from the Money Advice Service or central government, but are supported by trusts and foundations, private individuals, and the financial services industry, to continue our work for at least another three years. The messages we’ve received in that time have been greatly encouraging, and now we want to turn that support into action to step up our work over the coming years.Each year we reach around 30,000 11 to 19 year olds with our free, interactive workshops, helping young people understand about credit, debt, saving and budgeting. We also publish the Student Money Manual, a guide to managing money at university, which each year we distribute to half a million students.But it’s not just about young people. We think that adults also often need support. There’s no shortage of budgeting tools and apps or guides to using credit, but what’s missing are interventions that help people to start thinking about and having the confidence to engage

If we’re going to continue to do this and more, we need to work hard to secure our long term future. That means new partnerships and support, whether through donations or working with us to find out what our products and services can offer to you and your business.We believe, ultimately, that prevention is better than the cure when it comes to problem debt. If you agree, please support us in whatever way you can, and help us to help even more people to stay on top of their money.

with their money in the first place, and in an ideal world that would happen before they get into difficulty.That’s where our adult money workshops come in. These are unique, innovative programmes we’ve developed to help and inspire anyone get to grips with their money, focusing on five key areas:• how to plan your finances to enable you

to stay on top of your money and help you to achieve goals in the future

• how to structure saving to make bigger things happen and to prevent financial blips turning into a personal recession

• problems repaying credit can happen to anyone, how to take action to deal with it and whether there is expect help available for free

• how to choose financial products wisely and use them to enhance your financial wellbeing

• how to keep on top of what’s happening to your pay, your cash and your bank accounts.

Our full day money workshop is particularly relevant for frontline collection agents who have daily conversations with clients about money. We don’t assume those agents are necessarily experts with their money either!Alternatively, the two hour workshop might be for you. These cover the same areas but for direct delivery, so as part of your commitment to your staff’s wellbeing why not book a course for your next training day?We’re really proud of our work, including our industry leading Money Statistics and our consultancy work with all parts of the financial services industry to improve practices and outcomes for consumers, or our engagement with policymakers and regulators.

EARLIER THIS YEAR, WE

CAME EXTREMELY CLOSE TO SHUTTING DOWN DUE TO LACK

OF FUNDS – IN FACT IN MARCH OUR TRUSTEES

TOOK THE DIFFICULT DECISION TO CLOSE

THE CHARITY.

27

GETTINGTO GRIPS

WORTH YOUR SUPPORT

THE MONEY CHARITY AND ITS ROLE IN

CONSUMERCREDIT

Quick off the blocksHampshire Trust Bank announces the arrival of Andrew Dearden to launch their new block discounting service

To find out more, contact:

Andrew Dearden: 07481 815022 | andrew.dearden@htb.co.uk Jane Crier: 020 7862 6262 | jane.crier@htb.co.uk

Hampshire Trust Bank is the trading name of Hampshire Trust Bank Plc 2015 registered in England and Wales under number 1311315 (Registered Office: 131 Finsbury Pavement, London EC2A 1NT). Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority – Financial Services Register Number: 204601.

CONSUMER CREDIT PROFESSIONALS ARE PROBABLY THE LAST PEOPLE WHO NEED TO BE TOLD HOW IMPORTANT IT IS TO STAY ON TOP OF YOUR MONEY – BUT HERE’S A STARTLING STATISTIC, ON AVERAGE, EVERY DAY £7M OF CONSUMER CREDIT IS WRITTEN OFF BY UK BANKS AND BUILDING SOCIETIES. THAT ADDED UP TO MORE THAN £2.5BN IN 2014.

29

Restons HR.pdf 25/3/14 15:54:23

MEMBER ONLY

Anchor Computer Systems, 1 Chestnut Court, Parc Menai, Bangor, Gwynedd LL57 4FH Tel. 01248 672940 www.anchor.co.uk

Our experience and knowledge of theinstalment credit market means that ourSentinel system is capable of handling amultitude of different loan agreementtypes as standard.

This flexibility is at its core assisting you todrive your lending business forwardthrough the changes required by the FCA.

The adaptability means that it provides anend-to-end solution with web servicesenabling applications from customers, leadgenerators, brokers and affiliates and aback office function taking your customerfrom their initial application andunderwriting through payment collectionsand arrears management to settlement.

It is already the system of choice for over200 companies. Why not call us to see whythese companies chose Sentinel.

For further information onhow Sentinel can help yourbusiness contact:

Mike O’Sullivan 01248 67294007854 955070

Alternatively emailenquiry@anchor.co.uk

Can your Loan Management Systemtake your customers on a journeyPayday Loan • Instalment LoanGuarantor Loan • Secured Loan

The way we were... Oyster Bay Systems Ltd is celebrating its 30th year within the finance and leasing industry, and it is natural to pause for a moment to reflect on the past before looking to the future.

IT technologies have changed dramatically over the years, during the early 80s, the tasks were to clearly present information on a 24 x 40 character green screen, and to safely back up information stored on a 120k floppy disk. Data processing bureaux such as NatWest’s Centrefile provided companies with little or no IT resource, the means to run a finance business.

I summarise these as three mantras that have remained constant over the years, get a quart from a pint pot, keep taking the backups, and let somebody else do the things you can’t.

Today’s tasks are to clearly present information on a 320 x 480 pixel phone screen and to safely back up information stored in a data warehouse. Online portfolio management has replaced batch processing, and while accessibility has improved, and the responsibilities may be different, the outsourcing concept and business drivers remain the same.

Some things have changed though. In the 1960’s, the Radio and Television Retailers Association Ltd prepared a Credit Sale document for its members. The document makes good nostalgic reading.

No charge for credit was shown on the document, only the ‘cash price’ and a higher ‘total purchase price’ being the price for the goods if bought on credit. Any payment default allowed the seller to demand payment of the full outstanding balance without any entitlement to rebate. For good customers, and to promote early payment, the trader would often use his discretion to add a hand written note saying something like ‘cash price £23 17s 6d if paid within three months’ to the customer’s payment card. There was a merchantability exclusion clause, and a twopenny stamp had to be placed over the signature box if the deal was for more than £2.

From the same era, the Hire Purchase Trade Association of Berners Street issued a Hire Purchase document that also carried merchantability exclusions, and a beautifully simple rebate formula.

At the same time, Lloyds and Scottish Finance issued an HP document through Associated Distributors that carried the gem ‘married women cannot be accepted as guarantors without husband’s signature also’. On the positive side, the document did show the early shoots of an underwriting procedure with spaces for occupancy, marital status, age and employer’s details.

I am reminded as I write of the underwriting rule of a lender based near London “Never give credit to anyone who’s last name ends in the letter O”, and I wonder how he’s getting on today.

The financial transactions embodied within these paper documents are pretty much as in today’s digital counterparts, with the significant differences being down to cultural influences that have enhanced the duty of care to the consumer. The regime we work under today may be complex and bear heavy compliance costs, but it is comprehensive and continues to deliver a welcome turn round in the perceived integrity of, and trust in, the finance industry.

Looking to the future, we see cultural change continuing as the major disruptive influence on the finance industry. Newly confident internet based organisations are not willing to accept that traditional banking establishments are unassailable, and will change the shape of things like the payment networks and wholesale funding.

But of technology, will i-wateringly small digital devices become the goto screen for the user experience? Possibly, but they won’t turn the industry on its head.

For Oyster Bay, the future lies in our ability to adapt to ever changing cultural, market, customer and technological landscapes. In effect, the same strategy that has led to our continued, sustainable and solid growth.

We are pleased to have the opportunity to acknowledge our fantastic customer base, our loyal and dedicated employees, and of course the team at CCTA for their ever friendly support and expert advice.

So, thank you all, and here’s to another 30 years!

Michael Breach Managing Director, Oyster Bay Systems

OYSTER BAY CELEBRATES

30 YEARS

| FEATUREFEATURE |

Mark LanhamSenior Regulatory Consultant,

HuntswoodPhilip Benke Director of New Business & Marketing

The FCA sets the scene by telling us that financial services firms report about five million complaints each year, paying out about £5 billion in redress to consumers.These are huge numbers, which following the FCA’s proposed new rules (CP14/30), could result in a further increase to these numbers. We all know, with a change of rules, comes the inevitable domino effect on firms. They’ll mean a different, and hopefully more positive experience for customers, and affect firms mainly in an operational sense. The implications of these changes for firms are as follows:

1. MORE TIME TO MANAGE THEM YOURSELFAt the moment, you can deal with a complaint ‘informally’ in the space of one business day. If it isn’t resolved after this day, you have to escalate it through to the FCA’s ‘formal’ process. This might now be changed to three business days.This extra time could mean so many more customers are dealt with in a less formal manner. With more time to deal with the complaints informally, frontline staff (contact centres and branch staff) will be able to handle and resolve more and more complaints themselves, rather than escalating. This means more time and resource for firms to coordinate their resources on the more complex complaints. Yet, the challenges for firms are:• proving their frontline staff are actually

competent to deal with these complaints• a greater workload for frontline staff

might distract or take them away from other ‘business as usual’ activities such as promoting the products and services of the firm.

2. A MESSAGE IN THE MAILIf a customer’s complaint is dealt with within the three business day period, the firm must write a ‘summary resolution’ to them stating the complaint has been resolved and explain their rights to refer to the ombudsman if they’re not happy with the solution.Whilst the FCA believe this will help customers be more aware of the service the FOS provides, this may cause more customers to refer cases to it, maybe believing they’ll get better results. There’s also the question of whether frontline staff will be more likely to uphold a complaint, maybe unnecessarily, rather than risk the customer referring to the FOS.

3. ALL COMPLAINTS IN THE LIMELIGHTALL complaints will need to be reported and published. At the moment only the ones resolved AFTER the close of the next business day are.This will definitely make it seem like firms have more complaints, but it will help the FCA get a better overall picture of a firm’s complaints situation and be able to help them a lot more. It’ll have a better idea of issues and failings, look more closely at the areas of non-compliance, and provide them with a better informed analysis of root causes of the complaints. This might cause inaccuracies, particularly if the reporting is in the hands of frontline staff, strict processes for this reporting will need to be in place.

4. REVISED REPORTING RETURNFurther data would be required when you fill out your complaints return.There may be some issues in applying these changes given the relatively short timescale for when the changes are to be implemented (possibly March 2016).This means you’ll need to start preparing just after the summer months.

5. A CHANGE TO CALL CHARGESFirms mustn’t charge more than a ‘basic rate’ for calls about something the customer has already bought.This could be unrealistic, again due to the relatively short timescale for when the changes are to be introduced (around June of this year). The changes may not merely require changing just the numbers, but changing documentation, procedures, and potentially even IT systems. There’ll also be old documentation with old numbers on them. Affected firms will need to think about diverting these calls.

6. FOS FACTS EVERYWHEREThere are new requirements on where and when to provide details on the ombudsman service. Firms will need to provide details of the FOS’ service on their website, in their terms and conditions and when a dispute cannot be settled. They’ll need to amend their final response letters, website and other documentation.

7. FOS ON THE CASEAllowing the FOS to consider complaints that firms haven’t yet investigated.This will only be allowed if the FOS has approval from both the firm and the complainants. This new rule might complicate matters as it could result in dual investigations, with the FOS and the firm reviewing the complaint at the same time.The regulator clearly wants to make sure that the process of complaining is straightforward, transparent and fair to customers and for them to have straightforward access to the ombudsman service if they’re still dissatisfied. Such consideration and readiness for the imminent changes is therefore valuable in ensuring your firm is primed and prepared for what lies ahead.

Some would argue that too much profit is a good problems to have. However, if your loan management system is relying on simplistic methods for the accounting of earnings against specific agreements, you may be getting a distorted view of your actual profit. In an increasingly fast paced consumer credit environment where a big appetite for new and flexible products is the norm, the need for an accurate profit picture is more important than ever.

Do you know how your loan management system accounts for the release of earnings for the different loan and lease agreements your company provides?

THE RULE OF 78

The total interest on a fixed rate agreement is determined at the outset of the transaction based on the rate that the funder has charged the customer. Many older loan management software systems use the Rule of 78 (R78), which is a simplistic method of releasing earnings on a transaction based on the presumption that each instalment will include a reducing amount of interest as the underlying agreement progresses. R78 takes no account of the actual profile of the agreement, so you could be overstating your profits.

THE ACTUARIAL METHOD

Alternatively, the actuarial method uses the interest rate in the deal (the constant periodic rate of return) and applies this to the outstanding balance. In the first month this will be the original advance (less any deposit or first rental). The actuarial method will be in line with the cost of funding the transaction thus matching the income and expenditure and showing the true margin in each period. The actuarial method calculates the true margin in each period. The accounting standards applicable in the UK support the actuarial earning release method:

• FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland ‘The recognition of finance income shall be based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the finance lease’

• FRSSE, The Financial Reporting Standard for small enterprises ‘The total Gross earnings under finance leases shall be recognised on a systematic and rational basis. This will normally be a constant periodic rate of return on the lessor’s net investment’.

THE IMPACT ON PROFIT, AN EXAMPLE

Let’s take a simple example of a £24,000 loan at 12% interest for two years (24 monthly payments). 12% a year with monthly compounding is 1% per month. Thus after one month the interest for £24,000 is £240. R78 will use the same total interest of £3,114.32 however it apportions £249.15 to the first payment.

After 12 months using an actuarial schedule, the balance owing after the 12th payment is £12,715.57 and the accumulated interest paid during those 12 months is £2,272.73. Using the R78 method, the accumulated interest paid during those 12 months is £2,304.59 which is £31.86 more in interest. The difference becomes more pronounced as the amortisation period and the loan amount increase. For example, on a loan of £100,000 amortised for 4 years at 12% with monthly compounding, the difference in accumulated interest paid after one year is £564.82.

WHAT DOES THIS MEAN TO YOUR BUSINESS?

If your accounting method is using R78 you may be artificially inflating you profit and reporting incorrect information to the FCA. Although a company’s accounting method generally goes unseen by the vast majority of individuals within a business, the posting of incorrect numbers can potentially be catastrophic for future growth. Make sure your loan management system offers a robust accounting engine that can account for the release of earnings in the method that makes best sense and provides an accurate profit picture for your business.

THIS NEW RULE MIGHT

COMPLICATE MATTERS AS IT

COULD RESULT IN DUAL INVESTIGATIONS,

WITH THE FOS AND THE FIRM REVIEWING THE

COMPLAINT AT THE SAME TIME.

SQUEAKYWHEEL

ARE YOU TAKING TOO MUCH PROFIT?

COMPLAINTS CONSULTATION

CAUSATION

FOOD FOR THOUGHT

30 31

Authorisation - the importance of a planAs a result of last year’s announcement and changes to the Consumer Credit Act regarding the regulation of consumer credit moving from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA), as many as 50,000 firms will be in the process of applying for, or undergoing FCA authorisation.

Firms should recognise their regulatory business plan as a vital part of the overall application process. This plan is the regulator’s initial opportunity to understand the business as a whole including its structure, culture and internal operations and it is undoubtedly integral to their decision making process. Therefore to achieve the desired outcome, ambiguity should be avoided and care should be taken to ensure the relevance of all information provided.

You may seek professional help with your regulatory obligations throughout the permission process and beyond. Looking to identify aspects of your business that would benefit from further review, the list should include:

• enhancing your regulatory business plan• documenting staff training and competency assessment processes• documenting inherent business risks• detailing governance and oversight processes• enhancing due diligence and outsourcing documentation• aligning the compliance monitoring activities to documented risks and regulation• ensuring all policies, processes and procedures comply with the FCA’s systems and

controls regulations. Some suggestions on how firms can better prepare themselves for their regulatory journey are listed below:

PREPARE YOURSELF

Although company background is not a specific area listed in the business plan section of the FCA’s guidance notes, it is worthwhile to include as it can help to support subsequent sections. When detailing the background, firms should consider the FCA’s focus on likely business risk factors and ensure that it is background and not operational detail. Too much current operational detail under a heading such as ‘background’, could raise questions, cause unnecessary duplication and create confusion.

BUSINESS RISKS

The FCA believes a firm must be aware of, and consider all relevant risks: regulatory, operational, reputational, internal and external. A process widely used across financial service firms to demonstrate the level of awareness considered necessary, is a risk framework centred on a document that lists the risks relevant to the business and has an active management process.

TREATING CUSTOMERS FAIRLY (TCF)

TCF continues to be a central message from the FCA, it is vitally important for a firm to ensure a customer centric approach is in place which in turn demonstrates how TCF exists throughout the culture of the firm.

It is suggested that firms review the FSA papers that set out both good and bad practice around the key elements of TCF, TCF Culture paper (July 2007) and TCF MI paper (July 2007). Taking the time to review this documentation would be beneficial to firms in order to fully understand how to document and evidence any TCF work being done.

The regulator looks for a ‘bottom up’ and ‘top down’ approach to the creation and use of Management Information (MI) in a firm. The FCA also set out the criteria they believe ensures the MI produced remains applicable and robust.

MI and periodic reporting to a firm’s executives is a way of senior management ensuring TCF is embedded. Other than the MI itself, the tone of the reporting and content are also key to demonstrating the how TCF is embedded in a firm.

COMPLIANCE PROCEDURES

The FCA set out a list of documented compliance procedures that they need to see in place and clearly state that procedures must be available for inspection at any time. This requirement makes the management and version control of procedures a key aspect of a firm’s regulatory governance.

Traditionally compliance manuals have been single manuals that carry all the areas a firm must comply with and high level explanations on how this is to be done. Although having such a manual is still common place, a comprehensive suite of policies, processes and procedures can lessen the burden of putting all the detail expected by the regulator in one place.

The FCA does go on to state that there may be other compliance procedures and policies, which the applicant will need to include in its compliance manual depending on the type of business it intends to carry on.

George Xenoudakis Account Director

MEMBER ONLY

FCA first impressions

33

Regulatory Experts On Demand

Equiniti Hazell Carr is one of the UK’s leading providers of specialist regulatory resource and outsourcing expertise within the financial services industry.

Our aim is to ease you through Consumer Credit authorisation, cut through the jargon and support you every step of the way.

We supply cost effective, high calibre solutions including:

• Sense checking the authorisation pack

• Reviewing regulatory business plans

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• Financial promotions sign-off

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• Ensuring all policies, processes and procedures comply with the FCA’s systems and controls regulations

Contact Us

Tel: 01189 513971Email: contact@hazellcarr.comWeb: www.hazellcarr.com

5163 HazellCarr-CCTA-FP-Ad-5306 AW.indd 1 21/04/2015 11:12

49% of consumers say no to credit this yearCallcredit Information Group’s latest research has revealed a change in consumer attitude towards utilising credit with 49% of consumers confirming they have no plans to use credit this year, with over a third opting to use credit only to take advantage of rewards and cash backs.The independent research undertaken by YouGov highlights how consumers are managing their finances and use credit out of a desire to use it, rather than a need to, compared to previous independent research. The research looked into consumer behaviour around borrowing, which types of credit consumers intend to use this year, the main reasons for borrowing, the factors and rewards which appeal most and how they specifically manage their credit cards.The main findings show that of those UK consumers that are planning to use credit in 2015:

• credit card usage is the most popular at 42%• followed by an overdraft 16% • personal loans 5%• short term lending 1%.Will Lowe, Managing Director, Marketing Solutions at Callcredit commented: “Consumer spending has fluctuated over the years, which has been mainly down to the economic climate influencing consumer’s attitude to credit. “Previously some consumers have turned to credit to help cover the cost of living but our research highlights how this has been less common. Some are still turning to credit for this need but many are not taking credit at all, or managing their credit needs more carefully. “Clearly understanding this change in attitude is important if marketers want to provide consumers with the right deals for their needs and tailor their products accordingly.“The results highlight the need for marketers to develop a clearer understanding of each consumer if they want to be relevant and helpful with the products and services they provide.”

Source: Callcredit News Alert

FEATURE

Michelle HighmanChief Executive,

The Money Charity

The UK’s leading financial capability charity has called on all parties to make financial capability a key policy priority after next month’s election or face a personal debt crisis.

Figures from the Office for Budget Responsibility, released alongside the Budget, show that total personal debt is projected to reach £2.495 trillion by Q1 2020.

The charity’s Money Statistics reveal that outstanding mortgage lending in the UK reached £1.3 trillion for the first time in February, but this will increase by almost 50% as house prices continue to rise over the next five years.

The figures also show that average personal debt, including mortgages, is £29,126. By 2020, according the OBR, this will have increased by 62%. Using official population estimates that makes an average of £47,195 per adult, £34,124 of which will be mortgage lending.

Michelle Highman, Chief Executive of The Money Charity, said: “With total outstanding debt set to reach £2.5 trillion by the end of the next Parliament, we need to put plans in place to make sure everyone can manage their money, before they get into problem debt.

“That means well resourced financial education in schools, and support for adults throughout their lives as part of a joined up strategy for improving financial capability. It also means products that support people to manage their money, and fair treatment and insolvency options for people who do get into difficulties.

“Securing financial education initiatives in schools should be an immediate priority for whoever is in Downing Street on 8 May. There is currently no state funding for financial education despite its position on the national curriculum, and the third sector is hugely struggling.”

Source: The Money Charity Press Release

Personal debt to hit £2.5 trillion by the end of the decade

creditcrunch

35

10074-Callcredit-DecisionsMetrics-Press ads ENGINE_MECHANICAL_DATA_A4_AW(P).indd 1 01/10/2014 16:36

ADULTS IN THE UK WILL OWE AN AVERAGE OF OVER £47,000 BY 2020, ACCORDING TO NEW ANALYSIS BY THE MONEY CHARITY

data time share

36

Real-time data sharing - or is it?The heat is on for the high-cost-short-term market with the requirement for applying for full FCA authorisation from December 2014.

The ‘payday’ market has been under regulatory, political and media scrutiny since the concept migrated from the US to the UK in the mid noughties, essentially to fill a supply/demand gap caused by the mainstream lenders having caught a cold during the so called credit crunch.

In November 2014, the FCA published PS14/16: Detailed rules for the price cap on high-cost short-term credit (effective 2 January 2015), including feedback on CP14/10 and final rules.

This reflects the FCA’s strong commitment and clear remit to tackle what it sees as ‘poor conduct in the market’ and works alongside new rules on affordability, advertising, rollovers and the use of continuous payment authorities announced in February 2014 (PS 14/3).

The FCA has very publicly stated in its press release of 15 July 2014 that ‘only firms with a consumer centric approach can do business in future’ and their business models and management structure would be scrutinised to ensure they are treating consumers fairly and following the new rules, ‘firms that do not meet the required standard will not be allowed to carry on offering payday loans’.

In this press release was a clear expectation and requirement that improvements had to be made to the way firms share data about customers. Perhaps this critical area has not received the same amount of column inches as other reforms, but it is one that goes to the heart of credit risk assessment and affordability, both of which are regulatory pillars and commercial drivers.

In its discussions with the credit industry the FCA has been strongly encouraging firms and credit reference agencies to improve the way they share information about consumers, to ensure data are up-to-date and accurate at point of decision.

Similarly the Business, Innovation and Skills (BIS) Select Committee in its report published on 20 December 2013 cited inadequate affordability checks as one of the symptoms of a payday loans sector in urgent need of overhaul.

Things moved on and in a July 2014 press release the FCA stated that it expected to see evidence of a significant increase in firms participating in real-time data sharing by November 2014.

Both BIS and the FCA recognised that ‘effective real-time data sharing should enable firms to address the issue of consumers taking out multiple high-cost short-term loans from different providers at the same time that they are unable to afford’.

We have seen a lot of activity and press from the credit reference agencies, both mainstream and niche players, over recent months, claiming that this challenge has been addressed and real-time data sharing and access is now with us.

But is it? In a market as dynamic as ‘payday’ with its online immediate decisioning, what does ‘real-time’ really mean?

Putting regulatory expectation to one side, surely commercially as a lender there is a need to be comfortable that in a market where loans, and potentially multiple loans, are literally processed in seconds, they see this information as and when it happens.

The same applies to assessing the consumer’s behaviours through multiple searches and applications, and how they meet their repayment obligations. There can be a lot of activity relevant to the lending decision over the course of a month, and even during the course of a day.

Can a daily update or monthly batch file being processed by the credit reference agencies really meet a lenders needs, literally in ‘real-time’, to protect their book and optimise their risk and affordability decisions?

What might appear to be the solution may not quite be what it ‘says on the tin’. Payday margins are being squeezed, albeit from a rather profitable starting point, and some might argue that there is sufficient headroom in pricing to be able to sustain a level of bad debt.

But is credit reference (or bureau) data really being used for the intended purpose, or is it a cosmetic exercise to tick the regulatory box? Who is picking up the bill for this additional loan processing cost? Surely rate for risk is an appropriate pricing model with the use of bureau data to benefit the consumer?

Potentially the very issue that triggered this data sharing requirement will resurface as the regulatory, political and media expectations will not be realised and the industry will be under even more intense scrutiny.

Unless it commits to genuine real-time updates as and when an event happens the problem and threat to the sector will remain.

It is worth remembering the FCA’s comments in its July press release: ‘firms that do not meet the required standard will not be allowed to carry on offering payday loans’.

Mike Bradford Founder and Director, Regulatory Strategies

MEMBER ONLY

TOTAL MARKET MARCH YEAR TO DATECATEGORY NEW USED TOTAL NEW USED TOTALPASSENGER CAR 2015 399601 278353 677954 819512 723363 1542875 2014 373235 253210 626445 809674 678591 1488265 % Change 7.06 9.93 8.22 1.22 6.60 3.67

LIGHT COMMERCIAL VEHICLE 2015 20663 13855 34518 45827 38184 84011 2014 20536 13159 33695 46543 33118 79661 % Change 0.62 5.29 2.44 1.54- 15.30 5.46

HEAVY COMMERCIAL VEHICLE +3500 2015 3210 1893 5103 7483 5237 12720 2014 2046 1719 3765 6259 4464 10723 % Change 56.89 10.12 35.54 19.56 17.32 18.62

COACH 2015 272 361 633 516 949 1465 2014 216 301 517 504 1026 1530 % Change 25.93 19.93 22.44 2.38 7.50- 4.25-

MOTORCYCLE 2015 6616 3371 9987 12403 7646 20049 2014 6208 2996 9204 11726 7140 18866 % Change 6.57 12.52 8.51 5.77 7.09 6.27

MOTOR CARAVAN 2015 300 450 750 478 1176 1654 2014 454 162 616 884 375 1259 % Change 33.92- 177.78 21.75 45.93- 213.60 31.37

TOURING CARAVAN 2015 1175 2318 3493 2660 518 7849 2014 2502 910 3412 5670 1992 7662 % Change 53.04- 154.73 2.37 53.09- 160.49 2.44

STATIC CARAVAN 2015 108 38 146 258 132 390 2014 67 19 86 229 52 281 % Change 61.19 100.00 69.77 12.66 153.85 38.79

39

HPI Receipts SummaryMarch 2015

STATS

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Our chosen charity

40

The Money Charity Stats April 2015

The average monthly rent for a two bedroom house in England was £580, in London this was £1,387 (139% higher).

The number of people unemployed for over 12 months fell by 532 per day

58 properties are repossessed every day, or one every 25 min 2 seconds

77 mortgage possession claims and 54 mortgage possession orders are made every day.377 landlord possession claims and 298 landlord possession orders are made every day.

244 people a day are declared insolvent or bankrupt This is equivalent to one person every 5 minutes 55 seconds

According to the latest Family Resources Survey, 26% of all adults actively participated in a pension in 2012/13. This figure was 48% for employees, and 18% for the self employed.In Q4 2014, households saved an average of 5.9% of their pre-tax income.

Total credit card debt in February 2015 was £61.2bn. Per household this is £2,293, for a credit card bearing the average interest, it would take 25 years and 4 months to repay if you made only the minimum repayment each month.

The minimum repayment in the first month would be £56 but reduces each month. If you paid £55 every month, the debt would be cleared in around 5 years and 4 months.

Based on February 2015 trends, the UK’s total interest repayments on personal debt over a 12 month period would have been £55.579 billion.

That’s an average of £152 million per day.

This means that households in the UK would have paid an average of £2,081 in annual interest repayments. Per person that’s £1,101, 4.37% of average earnings.

The Pensions Regulator estimates that at least 5.178 million employees had joined a pension scheme under auto-enrolment by the end of February 2015

The population of the UK grew by an estimated 1,223 people a day between 2003 and 2013

33.8 million plastic card purchase transactions were made every day in December 2014, with a total value of £1.582 billion.

The number of mortgages with arrears of over 2.5% of the remaining balance fell by 76 a day.

The number of people unemployed for over 12 months fell by 553 per day.

1,239 people a day reported they had become redundant between November and January.

Government borrowed £229m a day during February 2015 (£2,564 per second).

41

It costs an average of £29.91 per day to raise a child from birth to the age of 21

On average, a UK household spends £2.91 a day on water, electricity and gas

Payment card expenditure in January amounted to £48.8 billion, 5% above the level a year ago. The number of purchases reached a record monthly total of 1.05 billion, up by 10% on January 2014, highlighting the important role payment cards continue to play for the consumer, providing convenience, safety and familiarity in their payment choices.The continuous strength in spending has mainly been driven by the maturing economic recovery coupled with a record high employment rate1 and positive growth in consumer confidence2. Other factors driving the growth included online and contactless spending. The number of purchases made online accounted for 12.3% of total purchases, up from 11.1% a month ago. During January around 4% of total purchases were made using contactless technology, up from 1% a year ago.Growth in payment card spending continued to decelerate slightly, growing at an annual rate of 7.3% in January. Debit card spending grew by 7.8%, while credit card spending increased by 6.1%. The Office for National Statistics recently released figures showed that annual consumer price inflation has fallen to its lowest level on record, reaching 0.3% in the year to January 20153, down from 0.5% in December 2014. The downward effect on the price index was mainly driven by reduced prices on motor fuels and food. Falling prices most likely accounted for the recent slowdown in spending growth.The robust growth of the number of purchases evident in the last three years continued into 2015. The annual growth rate of purchases continued to exceed that of values in January, highlighting a growing consumer preference of more frequent use of cards for lower value payments. During January the annual number of purchases grew by 10.1%. Furthermore, the annual growth in the service sector continued to outstrip that of retail sales. The service sector expanded by 10.1%, more than double the growth of spending within retail, which increased by 4.5%.The average transaction value (ATV) on all payment cards continued on a downward trajectory, falling by 27p during the month and by £1.87 over the year, to reach £46.53. Within the sectors, the

ATV in retail sales declined by 24p to £32.91, while the ATV for services fell by 56p to £75.94. Within the digital space the average transaction values tend to be higher than in the face-to-face environment; however, the downward trend is also evident. The ATV on all payment cards via the online channel amounted to £96.10 in January – more than double the ATV on all channels.There has been a consistent pattern over the last three years with higher growth rates in volumes relative to values resulting in declining ATVs. This sustained decline is mainly driven by the ongoing migration of low value cash transactions towards payment cards alongside the increasing acceptance and usage of contactless cards, including strong growth on the Transport for London network4. The ongoing price war amongst the major British supermarkets5, record low petrol prices and inflation have been other major factors applying downward pressure on purchase values.The number of transactions within the retail sector increased by 2.7 million to 719 million, with the corresponding spend rising by £107 million to £23.5 billion. The majority of the increase in spending was in the food & drink and other retail sub-sectors, reaching £9.0 billion and £3.8 billion respectively. Spending in the automotive fuels category declined for the sixth consecutive month after falling by £26 million to £2.7 billion, driven by falling petrol prices to the lowest level in six years6. Meanwhile, the number of transactions in the services sector grew by 3.4 million to 335 million, corresponding to growth in spending of £127 million to £25.3 billion. A major contributor of growth was the other services subsector, which recorded an

increase of £66 million to £7.4 billion. Entertainment also remained a strong contributor to growth after increasing by £30 million to £4.1 billion, mainly driven by strong growth in spending at sports & games establishments.In January the largest increase in spending is traditionally evident in tax payments boosted by the looming deadline of 31 January for self-assessment tax settlements. Government services also expanded considerably, mainly driven by the strong demand for ‘65+ Guaranteed Growth Bonds’ launched by National Savings and Investments in mid-January7. Along with growth in expenditure for tax related services and bonds, there were notable increases in card spending also at educational establishments and travel services. Meanwhile, spending on more festive goods from record shops, jewellers, sweet and cosmetic stores recorded the largest decreases.Ecommerce is constantly evolving with new technology and changes in consumer habits, becoming more prevalent and shopping on the move using mobile devices is increasing and is now common place. The number of card purchases made online amounted to 12.3% of the total card purchases in January, with corresponding online spending accounting for 30% of total card expenditure.Within the services sector 22% of purchases were made via the internet, while 8% of retail sales were online during the month. The most prominent online shopping category was entertainment, representing 27% of all online purchases in January, while the highest proportion of online spending was registered in other services reaching 33%. Mixed business was also a popular choice accounting for 17% of online volumes and 5% of values.

At a glance key figuresfor January 2015

Total spending(£ billions)

2015 2014

48.8 46.5

34.3 32.7

14.5

All plastic cards

Debit cards

Credit cards 13.8

Annual growthrates for spending

2015 2014

7.3 7.3

7.8 8.3

6.1 5.1

Number ofpurchases (Millions)

2015 2014

1,054 962

809 740

245 222

KEY POINTS:

Richard Woolhouse, Chief Economist at the BBA, said:

“The increase in mortgage approvals is welcome news and a sign that the housing market is beginning to improve. We’re seeing stronger demands for mortgages as consumers take advantage of some of the very competitive deals currently available.”

HIGH STREET BANKING STATISTICS [BBA] – FEBRUARY 2015

UK CARD EXPENDITURE STATISTICS – JANUARY 2015

1 ONS, Labour Market Statistics: http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/index.html2 GfK’s UK Consumer Confidence Index: http://gfk.com/news-and-events/press-room/press-releases/pages/january-sees-a-five-point-increase-inconsumer-confidence-levels-.aspx3 ONS, Consumer Price Inflation, January 2015: http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2015/index.html4 TfL named fastest growing contactless merchant in Europe: http://www.tfl.gov.uk/info-for/media/press-releases/2015/march/tfl-named-fastestgrowing-contactless-merchant-in-europe5 The Telegraph, Food prices fall sharply as supermarkets step up price war: http://www.telegraph.co.uk/finance/economics/11387343/Food-pricesfall-sharply-as-supermarkets-step-up-price-war.html6 BBC, How low will petrol prices fall? http://www.bbc.co.uk/news/business-307833787 Investors Chronicle: http://www.investorschronicle.co.uk/2015/01/20/comment/smart-money/don-t-panic-over-ns-i-bonds-0hvc312vSptvPTA4iNlhbK/article.html

Deposits with high street banks weakened in February, possibly due to alternative investment in the new pensioner bonds, where some £10.0 billion of sales have been reported.

Annual growth in unsecured borrowing is at its highest rate since late 2008, at 4.4%.

Gross mortgage borrowing in February was £9.6 billion – 17% lower than in the same month last year.

Despite slower demand in the second half of 2014, the overall mortgage stock is 1.3% higher than a year ago.

annual growth rates mortgage borrowing

gross borrowing

value of approvals(shifted forward 1 month)

net borrowing

-8%

-4%

0%

4%

8%

12%

Feb 12 Jun 12 Oct 12 Feb 13 Jun 13 Oct 13 Feb 14 Jun 14 Oct 14 Feb 15 -1

4

9

14

19

24

Feb 01 Feb 03 Feb 05 Feb 07 Feb 09 Feb 11 Feb 13 Feb 15

£ bn

adapt to the digital landscape

42

Drivers of growth in unsecured lendingAs the UK’s unsecured lending market continues to develop, the important question for every lender is where their future growth can come from.

Two key drivers are the growth of their market/s and how successfully they can adapt to the fast evolving digital landscape.

THE MARKET

Understanding the macroeconomic factors influencing the unsecured lending market is vital context for lenders looking to exploit niches to win market share.

The UK’s growth forecast for 2015 was increased by the Office of Budget Responsibility in George Osborne’s sixth budget, while inflation is not expected to reach the Bank of England’s 2% benchmark until 2018/19, setting the population up for several years of spending and giving wages the chance to catch up on pre-recession levels. Data from the Mintel UK Loans report which analysed the UK loans market in 2014 helps identify the key trends in the market:

• the market experienced its fourth successive year of growth

• gross advances were estimated to have grown by 13% year on year, and to have reached roughly £26 billion for the full year

• rates dropped as low as 3.9%, making loans more affordable in a competitive market

• total unsecured lending, including credit cards, car finance and overdrafts as well as personal loans, is estimated to have increased 6% from 2013, to total some £213 billion

• credit card lending increased by £5 billion, or roughly 3%

• high street banks continued to dominate the personal loans market.

The growth in credit card spend and car finance is encouraging for many smaller lenders, who tend to enjoy greater market share in these areas than the ordinary unsecured lending market. There is arguably more opportunity for future disruption in these markets too, with point of sale finance potentially eating into the credit card market.

With over half a million more people in full time employment and stable consumer confidence there is much to be positive about. If the base rate continues to hold at 0.5%, the pool of potential borrowers will grow.

Consistency in the wider economy has allowed lenders to price for this ongoing low base rate environment. The cost of wholesale funds continues to be cheap for lenders, while rising wages and low inflation/deflation is gradually increasing affordability on the whole.

DIGITAL LOANS

It is widely accepted that the lending industry is moving towards digital loans. A digital loan is one that can be completed entirely electronically. The speed of the migration towards digital loans is firmly in the control of the consumers. The emergence of smartphones and tablets has led us towards an ‘any time, any place, any device’ culture and lenders now need to align to these changing consumer demands.

How do lenders cater for the digital borrower? Automation doesn’t just apply to internal processes now, it is how customers want to transact throughout the loan journey and it is the job of today’s lenders to recreate the experience customers enjoy through face-to-face lending.

Logically, the next generation of customers will be incredibly comfortable online. For example, Ofcom research last year found children aged 12-15 only conduct 3% of their communications on the telephone, 94% of their communication is text based.

These children will be the next generation of students, looking to borrow via laptops, tablets and smartphones and could turn into customers that don’t feel the need to use providers with a branch presence.

Lenders will face challenges in meeting the needs of these customers, not least the established lenders with legacy issues to address in their systems.

WHAT NEXT?

The next 12-18 months will be a defining period for lenders because the digital borrower is set to be the dominant borrower. Adoption of technology over the entire consumer lifecycle is here and will continue to grow quickly to become a service demanded as frequently as instant decisioning and the making of funds available within minutes, developments realised in the payday industry.

Lenders who stay in tune with consumer attitudes (security, technology, ease of use), maintain visibility and deliver consistent quality will be well positioned to be their lender of choice time and again.

Richard Carter Chief Executive, Nostrum Group

MEMBERS ONLY

Technology – making lending cheaper, faster and safer.

Our disruptive loan management software allows some of the UK’s largest banks, lenders and retail brands to provide a fully digital and automated experience, enabling their customers to manage their finances any place, any time, and on any device. To find out more, speak to one of our experts on 0844 8118 039 or visit www.nostrumgroup.com @NostrumGroup TheNostrumGroup