This year, on 1st November, the CCTA will hold its National Conference at The Belfry, Nottingham. This is an opportune time for us to reflect over the last 10 years and the pace of change in several component arenas that impact on our great Industry, and the changes in the wider landscape that will affect the next 10 years. Conference will discuss and explore the immediate key issues, and then look to the horizon to discuss how the CCTA can assist in helping businesses to protect themselves from negative disruptors.
There is no denying that out of chaos comes great change. However too much chaos creates mayhem, and we see that aplenty in current politics especially BREXIT. Modern companies are learning how to use controlled chaos as one of building blocks for the future, and re-inventing themselves repeatedly to stay ahead of the market. 10 years ago consumer credit business was more or less straight forward, you lent money and collected it back within a regulatory framework protected by the law. Both companies and consumers for the best part were well provided for, but then came along financial chaos and the long and painful road that we still travel.
I am sure that most people at some stage in their life have heard of the butterfly effect. This effect grants the power to cause a hurricane in China to a butterfly flapping its wings in New Mexico. It may take a very long time, but the connection is real. If the butterfly had not flapped its wings at the just the right point in space/time, the hurricane would not have happened. Chaos or change is commonplace and we are seeing the butterfly effect in most markets, as there are no longer prizes for longevity. In financial services Lehman Brothers historically are now being seen as the eye of the Storm, at the beginning of Credit Crunch in 2008, when in fact that was the commencement of the reaping of the harvest of the seeds sown well before.
Some Disruptors are being lauded as a new form of avatars when in essence all they are doing is taking a product or service to a new level. What has changed is the speed that products and markets change to accommodate consumers’ needs, but most often it is the balance sheets of companies experiencing the attack. All business sectors are being impacted not least retail which is an exemplar model for everyone, history and tradition have little place in today’s world. Firms need to be recruiting thinkers and innovators, and market disruption should be on a firm’s risk register and the horizon gaze required by the Regulator.
We are seeing disruption within the UK data market.The three largest Credit Reference Agencies (CRA’s) Experian, Equifax, and Callcredit have recently re-invented themselves as Credit Brokers and are all providing Credit Score guidance products to consumers. The CCTA are a member of SCOR [ Steering Committee on Reciprocity ] and we continue to monitor the usage of SME’s data to protect our Members interest. With the recent purchase of Callcredit by Transunion, all three CRA’s are now American owned. Thinking outside of the box, is there a possibility at some stage that they will commence lending?
In view of how far disruption is good for business – well, this is really like a curates egg: good in parts. Time does not stand still and the world has shrunk, so you do not know where the next attack will emanate from or how quickly. In our market place a disruptor’s business model could look completely different to what’s already there, so it can be hard to see a disruptor in its early stages. In essence, a disruptive innovation is an innovation that creates a new market and value network that eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances.
In the consumer credit world a major disruptor has been the FCA & FOS. Two years after the FCA Authorisation was completed the consumer credit universe has been depleted with well over a 50 % decay in firms in all sectors, who have left the market with many other firms collecting out, or struggling along on reduced profits. The weight and cost of regulation has created a skewing of the market away from small firms to larger firms, and away from traditional community lenders providing a range of loan products. The FCA is well aware of our concern regarding the decay of the Industry players and the impact it will have on access to responsible credit.
We have ongoing concerns with FOS, another major disruptor, with regard to process and protocol. The background to these concerns have been repeatedly raised with FOS and we have repeatedly asked for an Independent Audit of FOS by the National Audit Office [ NAO ] and pressed this home with MP’s. A limited FOS Audit was finally done after MP’s requested an Audit, post the Channel 4 Dispatches programme, which was consumer focused on the poor processes and protocol of FOS. Richard Lloyd, former Executive Director of Consumer Which was appointed to conduct the review, which was limited and skewed towards the consumer. Before the review we made written representations to Nicky Morgan MP, Chairperson Treasury Select Committee [TSC], plus other TSC Members. The televised TSC hearing was tame, coming a few days prior to Parliament rising for the summer recess.
The CCTA has also collaborated with the Times on the FOS storyline, and we will re-engage when we have further evidence on CMC’s vexatious claim activities. We are working with our Members on this at the moment.
In particular, we have recently highlighted to widespread media how many CMCs are making “vexatious and fraudulent” claims. According to FOS, compensation can only be claimed six years from the event the consumer is complaining about, or three years from when the consumer knew, or could reasonably have known, they had cause to complain. However, we know that many lenders are being “carpet-bombed” by CMCs, many of which fall outside the six year limit.
One of the main knock-on effects of a more restricted market is that more people are turning to family and friends to borrow money. This could become hugely problematic with interest rates on the rise and prices set to increase: what would be the impact of this if we were to see another recession or mini-recession?
At CCTA, we will continue to campaign for ‘fair play’ and a greater balance between regulation of the consumer credit market and the CMC industry. Our Leadership in a Disruptive World is a reiteration of this message, that the CCTA will be at the vanguard of leading the fight for the Industry.
Greg Stevens, Chief Executive Officer, CCTA