The Consumer Credit Trade Association (CCTA) has published a statement in response to the Financial Conduct Authority (FCA) ‘Dear CEO’ letter issued to all high cost short-term lenders (HCSTL) regarding the issues surrounding the increase in complaints about unaffordable lending and how the FCA expect firms to firms to manage the impact. Lenders have been requested to assess their lending activity to determine whether creditworthiness assessments are compliant and inform the FCA if they are unable (now or in the future) to meet their financial commitments because of any remediation costs.
The Dear CEO letter refers to four recent decisions made by the Financial Ombudsman Service involving individual complaints about payday loans which illustrate the FCA’s concerns and that these cases should be used by lenders when determining their own complaint handling procedures.
In response, The CCTA said that is concerned that this latest stroke only serves to add to the ‘ regulatory creep ‘ which is already concerning members and industry alike. FOS is acting like a regulator while the regulator acts like a consumer activist, but neither are looking through the lens of natural justice and reality. Impartiality and fair play to both the consumer and business in parts seems to have disappeared out of the back door. The Wonga collapse could be repeated elsewhere, and the continuing fraudulent consumer behaviour promoted by the current rise in litigious thinking could bring about a dramatic loss of access to responsible lending to higher risk clients.
With all the indicators pointing to the lower paid already struggling, and people between jobs, with broken relationships, or a blip in their life having to use the ill-fated Universal Credit, there will be fewer financial lifelines available. The Banks have already increased their cut off rates, so less people will be able to borrow, and the BoE last week was looking for even more credit risk aversion. The danger is that the distance between ‘the haves’ and ‘the have nots’ will become greater at a time when the UK could be going into Brexit recession.
We must take action now to prevent an access to credit drought that will affect society and the economy today, and for our future generations the statement concluded.