The Financial Conduct Authority (FCA) is “just as concerned about over forbearance as under forbearance”, according to its interim chief executive, speaking at Credit Today’s Credit Summit.
In a state of the consumer credit nation keynote at yesterday’s Credit Summit in London, Tracey McDermott covered a range of issues including forbearance, payday lending, commercial debt management, and public trust.
Although many firms have now received full authorisation, she warned a packed hall of delegates that “they should not be expecting to hear any less from us this year, than the last two years.”
After being introduced by broadcaster Evan Davis, she explained that her teams have seen businesses making the necessary changes and embedding the culture of TCF throughout their divisions.
But she added: “These changes are not a ‘nice to have’, they are critical, and we are content to see firms leave the industry if they don’t reach those standards.”
On lending volumes, she said: “Consumer credit lending was reported to be £180m last year and we know the majority of that was lent to people responsibly, but if you just looked at the press for an opinion on consumer credit firms, you wouldn’t think this was the case.”
On debt management firms
As was expected, McDermott raised concerns about debt management firms – a sector in which Credit Today understands no commercial debt management firms have secured full authorisation yet, where more than 100 firms have left the market.
On commercial debt firm PDHL, which was refused authorisation, she added: “In this case we found files not being reviewed for months despite job losses among the clients.
“One client was even told they should maintain £30 of monthly repayments despite the fact that they were not receiving any income.”
On payday lending
McDermott said that in the past, the FCA has seen customers in the payday lending sector in vulnerable circumstances being treated “very badly indeed”, where the primary objective had been “to take advantage of customers and not serve their best interests.”
“But we’ve now seen firms in this sector change their business models,” she added, “and improve the affordability of loans. But the changes have led to a reduction in the business generated. In each of the last three years lending volumes have dropped.
“Citizens Advice has also reported a reduction in the same period of people with problem debts linked to payday loans.“
On the wider market
The FCA’s chief said that “not everyone has been willing to adapt their practices”, adding: “A number of firms have exited the industry and we have formally refused authorisation applications from 40 firms. 1,400 firms have also withdrawn their applications. We make no apology for imposing high standards.”
A full report of the Credit Summit will appear in the May edition of Credit Today magazine.