Current Issues

The FLA campaigns on key industry issues and influences proposals for change, helping shape government policy and regulation. This involves developing policy areas across the wide range of industry issues, lobbying decision-makers both at home and in Europe.

The FLA is committed to promoting responsible lending and delivering real help now for consumers in financial difficulties. Our robust Lending Code ensures that consumers are treated fairly.  However, with a contracting consumer credit market (in the year to March 2010, FLA members’ lending dropped by 10% compared with the previous year), there is a real concern that a proliferation of regulatory reviews and consultations, coupled with the further regulation already in the pipeline, could cause the market to shrink further. This could have a serious impact on the availability of credit for consumers.  The FLA is working to ensure that a balanced approach is taken by the Government to its work in respect of the consumer credit market. It is important that the needs of the credit consumer are fairly balanced against those of the credit providers.

The FLA Consumer Finance team are currently working on:

Consumer Credit Directive and Irresponsible Lending Guidance

The FLA is working with members to ensure the smooth implementation of the Consumer Credit Directive (CCD), which the industry must implement by the end of January 2011.

The Directive and the Irresponsible Lending Guidance will change the way that credit is sold, especially when it is being sold face to face. Such sales will require a verbal explanation of how much the credit will cost, the repayment terms and any consequences of non-payment. Even in distance sales, such as where credit is taken out online, this information will need to be given, and consumers will have to confirm that they have read it.

The CCD also requires lenders to give customers information about credit products using a standard form, which will not allow for adaptation by different lenders. There is also a requirement on lenders to assess the applicant’s creditworthiness before granting the loan.

The other big change under the CCD will be that customers will have 14 days after signing the agreement in which to change their mind about taking credit. If the credit was taken out as, for example, an instalment credit deal on goods, then the customer will have to find another way to pay for the goods. The cancellation right applies only to the credit.

 These changes will impose challenges for lenders as they implement the regulations, the biggest one being retraining staff to comply with the new sales regulations.

Review of the FLA Lending Code

The FLA Lending Code stands out as an example of effective and flexible self-regulation.  In order that the Code remains fit for its purpose and relevant to the industry in which it operates, in 2010 we are undertaking a review of the Code, especially in light of the new regulations of the Consumer Credit Directive and the Irresponsible Lending guidance from the OFT. We expect the review to be completed by the end of the year.

Store and credit cards

The FLA and its members that provide credit and store cards recently agreed measures with the former Government which have reformed the way in which credit and store card accounts are operated. Minimum payment levels have been increased for new customers; the order of payments has been reformed so that the most expensive debt is paid off first; customers can reject (or choose not to have) credit limit increases; and each customer will be provided with a statement of charges associated with their account annually, so they can see how much their card has cost them to use.

These reforms were agreed between government and industry and announced on 15 March.

But the new Coalition Government has proposed further changes to credit and store cards, which would see the Office of Fair Trading being given powers to impose rate caps on interest rates on credit and store cards.Other measures in their proposals involve a seven-day cooling off period after taking a store card out during which the customer would not be able to use the card. This replicates measures already being brought in to credit regulation by the CCD. The other proposal from the coalition is online statement on credit accounts, a measure which lenders have already agreed to in credit and store card reforms.

Credit searches

The FLA, along with the British Bankers Association, UK Cards and the credit reference agencies, have agreed that they will begin work on how quotation searches can best be used when a person wants to shop around get an accurate quote for credit without the search being recorded on their credit file and damaging their chances of getting credit.

Payment protection insurance

The FLA is currently in discussions with both the Competition Commission and the FSA about the future of PPI. The Competition Commission is concerned about the credit provider’s advantage in the sale of PPI and has made moves to delink the sale of the insurance and the credit, despite successful appeals from the industry.The FSA is concerned about the treatment of complaints by firms offering PPI. They are currently proposing a set of guidelines which will have huge costs on the credit industry. We continue our discussions with the FSA to try to find a solution which will be fair to lenders, while allowing consumers the redress opportunities they seek.