CFA expresses concerns as information about Woolard Review panel emerges

The Consumer Finance Association (CFA) has expressed concerns as information about Woolard Review panel emerges.

In September 2020, the FCA Board asked Christopher Woolard to review change and innovation in the unsecured credit market and to report to them in early 2021.

The Review will concentrate on how regulation can better support a healthy unsecured lending market. It will take into account the impact of the coronavirus on employment security and credit scores, changes in business models and new developments in unsecured lending including the growth of unregulated products in retail and the workplace. He will be assisted by an advisory group and will make recommendations to the FCA Board in early 2021.

The terms of reference for the review are:

• To examine the current state of the unsecured credit market in the UK including the component parts, recent changes in size and scale, whether in regulated or in adjacent unregulated products.
• To examine changes in regulation, noting those areas that have been subject to regulatory oversight in recent years from a variety of bodies including the FCA (for example overdrafts or high cost credit), and comparing likely harms or dynamic effects seen in those areas.
• To examine the immediate effect of coronavirus on demand for unsecured credit and on the role of credit information.
• To report on possible trends and potential future pressures.
• To identify areas of growth in demand from consumers for credit including from non-traditional providers of credit.
• To present an assessment of the benefits and harms evident in the market and those that may be expected as the market develops.
• To compare international approaches to these issues where relevant.
• To make conclusions and recommendations to the FCA Board on management of harms in this sector; gaps in understanding or data; potential changes in regulation for the FCA to consider; advice on potential changes to the overall system the FCA may wish to consider with other authorities or the Government; and possible innovations to support a sustainable market.

As more details of the review have been published, Jason Wassell CEO explained the CFA concerns he  said “Having now seen the composition of the advisory panel, we are concerned that there is a lack of representation from the unsecured credit market itself. We had hoped that industry representatives from across the sector would allow for an informed Review.”

“Alongside this, the terms of reference and the call for input are very broad so we have further concerns that the report will fail to explore the real issues facing the sector and its customers.”

“It is vital that this initiative seeks to understand the customer base. The Review should focus on the consumer and how they access modern credit. One of the issues to be discussed must be how the current system fails those who are underserved.”

“While we welcome the involvement of Malcolm Le May of Provident, it does seem that the banks are being asked to represent the benefits of consumer credit. But the unsecured credit market includes many small companies that fill the gap left by the banks. These firms are finding it extremely difficult to operate with tightening regulation and the impact of COVID-19.”

“Without addressing these issues, we struggle to see how any recommendations made to the FCA Board could be effective.”