A Consumer Credit Trade Body, the CCTA, that represents over 250 consumer lenders, including firms that specialise in log book loans, high-cost credit and guarantor loans, has come out and demanded greater protection for vulnerable consumers against over-zealous financial regulators who are capping interest rates, fixing prices and awarding mis-sold loan compensation.
The CCTA has expressed their concerns that UK financial regulators, the Financial Conduct Authority and the Financial Ombudsman Service are “squeezing out the middle”.
The CCTA is worried vulnerable UK consumers are now being denied the opportunity to borrow at usurious interest rates and are being encouraged by the Financial Ombudsman to claim against irresponsible lenders who burdened them with unaffordable loans and at interest rates that trapped them in a world of rolling over debt.
Such is the CCTA’s concern, it is now calling for:
“…balance and proportionality in…regulation… and to find some consensus with consumer voices as to what ultimately is the best, or least harmful, outcome for consumers who are going to need access to credit come what may”.
Presumably that “least harmful outcome” does not involve interest rate capping, as has been introduced by the Financial Conduct Authority for pay day lenders, or price capping that will soon be applied to rent to buy firms such as BrightHouse. Nor, no doubt, will it involve allowing the Financial Ombudsman Service to right the wrongs consumers suffered at the hands of the predatory lenders who sold nearly 60 million payment protection insurance policies to over 30 million consumers, and which has seen nearly £40 billion paid back in compensation.
Instead the over-arching message the CCTA wants to get over is:
“…the cascade of regulation in the past 4-5 years has reached a point where the powers-that-be risk harming consumers instead of protecting them…”
and presumably wants to see an end to the:
“over-regulation…and..claims racket of dubious legality that is targeting lenders with historic ‘affordability’ claims, seemingly aided and abetted by FOS”.
Thank god, the CCTA has now eventually found its consumer champion voice and is speaking out in the interests of consumers.
Only the most cynical would wonder why we didn’t hear that voice when these historic, unaffordable loans were being mis-sold; or when payday lenders were using business models that were based on rolling over loans for the most vulnerable multiple times over, whilst charging interest rates of 1,000’s of percent.
Only the most cynical would think the real reason the CCTA has found its consumer voice and is calling for greater protection for consumers against bureaucracy loving regulators is because
“.. the rate of business closure in.. [their]…own association..”
is now on the rise.
However, the CCTA have also expressed concern at the rising number of consumers now turning to family and friend for loans (presumably because they would prefer they took out loans with their members and got their family and friends to act as guarantors) and illegal loan sharks (whilst failing to recognise that many of those who are using illegal money lenders also previously used sub-prime lenders and cannot now access legal credit because the over-indebted mess they have been plunged into).
The brutal truth though is the CCTA are being delusional if they think they can find common cause with consumer protection voices, whilst attacking the increased regulation that we have seen over the last 4-5 years, which is finally bringing under control the Wild West lending environment that was allowed to flourish after the credit crunch.
They are also in a state of self-denial if they believe that unaffordable lending can ever have a role in creating a well-regulated, balanced consumer credit market (and before they begin complaining about the rise in unaffordability claims, they should remember tens of thousands will never see a penny of those claims as lenders like Wonga exit the market).
The problem is the reaction by the CCTA and their member to the financial regulation of the FCA is entirely predictable and foreseeable.
It also shows how much they really think of consumer protection voices, if they think some common ground can be found, that no doubt will be predicated on self-regulation and voluntary industry regulation (yep, cause that worked so well last time).
They also seem to be deluded in believing these bad practices, now being stamped out, previously served some social good.
Access to credit, particularly for the most vulnerable, is definitely a problem, but it has to be solved by providing people with access to affordable credit, not by leaving people vulnerable to predatory lenders, intent on mis-selling loans, whilst charging usury interest rates and leaving it for the lenders or the distressed borrowers themselves to subjectively define what constitutes affordable.
(This is a satirical blog and contains the personal views of the author. The full statement by the CCTA can be found here.)