Who’d be a politician in this day and age? Mistrusted by the public, poorly paid (according to them) and required to be an expert on any topic on which they are asked an opinion. While I might not have much sympathy for the first two points, the last one does concern me.
A lack of expert knowledge in a subject may make life tough for a politician, but that lack of knowledge can be altogether more problematic for our industry. To some extent, the civil servants are there to make sense of the political will. But if the initial political foundation is misguided, then they have a tough task.
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Over recent months there has been a lot of political talk about changing and increasing regulation – whether it’s the press, banks, or even the NHS. Quite right, I hear you say, that’s surely what politicians are there for: to keep the public safe, and create a society that is fair and just. I would, of course, wholeheartedly agree, as long as the proposed regulations are based on sufficient knowledge about the industry or sector being regulated and that brings me on to the subject of regulation within our own industry.
I should start by making a couple of important points about the industry we work in. First, it’s big. According to the Finance & Leasing Association (FLA), its members lend more than £23bn in motor finance alone. The second point is that we’ve been around as an industry for a long time, constantly evolving, always focused on providing consumers with products and services that allow them to get on with their lives.
As our industry has developed and grown, regulations have been introduced, always adding more layers of complexity in the name of helping the customer better understand the product. Regulations have also been added to prevent the perceived excesses in the consumer finance market. Much of the pressure for this layering of regulation has come from politicians.
But here’s the problem – the market the politicians have been addressing has been a different one to ours – nearly always white goods or unsecured credit. Over the years, we’ve seen additional layers of regulation, all promoted by politicians, with a view to protecting the customer’s interests but, in reality, rarely achieving this objective. It could be argued that the politician’s lack of knowledge about our industry has actually been detrimental to consumers.
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By GlobalDataLet me give you some examples. Take a look at the amount of paperwork the customer gets when entering a new contract. Every element has been designed to protect and inform the customer but, when put together, they end up being more of a hindrance to clarity than a help.
The right of withdrawal was implemented by the regulators to give customers choice, but in reality it’s a remedy that only really works in an unsecured market; not where the customer has an asset that they use and which loses value as a result.
The half rule is only really meant for white goods. It is inappropriate for cars and costs consumers more than £50m a year, losses that are spread across paying customers. These are just some examples. There are more, of course.
So what can be done about it? Well, while this article might sound negative, I’m actually hopeful that things are about to change for the better. First, we are well represented by the industry body, the FLA, which has a long and successful track record of working with regulators to make sense of the broader ideas that first see the light of day as political ideas. Secondly, the move by the government to replace a number of consumer sales regulations and Acts with a single piece of legislation is a very good idea. It will bring clarity and focus and hopefully the stranger rules will become unsupportable.
We should welcome these changes and support the incoming regime, but we should never lose sight of the fact that no politician knows our industry better than we do. We must be proactive in telling our politicians about the realities of our industry whether through the FLA or individually. The end-result can only be better regulation both for consumers and for us.
The past history of changes to regulation in this industry isn’t good, but we can only hope that the effect, this time, is positive.
Peter Minter is managing director of Moneybarn
