On 15 October, the FLA held the fifth in a series of conferences examining the impact of the Financial Conduct Authority’s new consumer credit regime on FLA members and their customers.
We are now eighteen months into the new regime, and the process of authorising tens of thousands of consumer credit lenders and intermediaries is well underway. Our latest conference therefore took a look further ahead, examining the FCA’s likely supervisory priorities over the next year and a half, and what lenders should be doing to prepare.
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One of the points I made in opening the conference was that there is an importance difference between what the newspapers often call "unaffordable debt", and responsibly-provided credit. FLA members are in the business of supplying UK consumers and businesses with the latter – and thus make a vital contribution to economic growth.
In 2014, FLA members provided £74 billion of affordable and sustainable consumer credit to support purchases ranging from cars to household goods. They also provide around £15 billion of new asset finance (leasing and hire purchase) to SMEs very year, a significant amount of which is also covered by the new FCA regime. The net effect on the UK economy was recently measured for us by Oxford Economics, who found that FLA members are five times more productive than the UK average. Between them, they support some 330,000 UK jobs.
As we have pointed out to the FCA, this is why we need a regulatory regime which allows our industry to continue to serve its customers responsibly and well, while keeping pace with increasingly rapid technological developments. Speakers at our conference made quite clear that, even though the new regime came into effect on 1 April 2014, we are still some distance from seeing its final shape.
For example, the FCA has recently announced fundamental changes to its approach to the supervision of firms in the credit markets, replacing the existing approach with a new "fixed or flexible portfolio" system. The FCA is also conducting work on creditworthiness and affordability, remuneration structures, credit cards, debt management, second-charge lending, and a whole variety of other market areas. All of this will have important implications for the future size and shape of the regime.
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By GlobalDataAnother challenge – which we talked about during the afternoon session at the conference – is the impact of technological and social change on the industry, and the likely implications for regulation. We heard fascinating talks on the new communication technologies, the use of social media for marketing and consumer communication, and on the application of behavioural economics to regulation, and to business models more generally.
Many of these medium and longer-term trends will be important for the motor finance markets. During 2016 they will figure high up the FLA’s agenda for action on behalf of our members, alongside all our other work on the new FCA regime.
Stephen Sklaroff is the director general of the Finance & Leasing Association
