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Financial Conduct Authority sets out agenda and priorities for consumer credit

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  • Financial Conduct Authority sets out agenda and priorities for consumer credit

    The Financial Conduct Authority (FCA) has today published the outcome of its review into high-cost credit, which includes its assessment of the effectiveness of the payday loan price cap.

    https://www.fca.org.uk/news/press-re...onsumer-credit
    Tags: None

  • #2
    Re: Financial Conduct Authority sets out agenda and priorities for consumer credit

    STEPCHANGE - Our response to FCA high-cost credit review and creditworthiness proposals

    31 July, 2017

    In response to the Financial Conduct Authority’s (FCA) review of high-cost credit and proposed changes on creditworthiness assessments, Mike O’Connor, Chief Executive of StepChange Debt Charity, said:

    “Last week, the Bank of England warned that lenders may be dicing with a spiral of complacency in relation to the rapid growth of consumer borrowing. The role of the FCA is to police the market and ensure that any complacency doesn’t translate into harm for consumers.

    “Today’s announcement marks a slight tightening of some rules. It remains unclear, however, that these measures will address some of the fundamental problems that still exist in consumer credit market, including persistent credit card debt, persistent overdraft debt and multiple payday loan borrowing.

    “The FCA has said that the status quo on unarranged overdrafts is not an option and that there is a case for fundamental reform. The charges for unarranged overdrafts are a real problem for our clients and it is disappointing that no action will be taken until spring 2018. The market is already showing signs of movement on this issue, so there is no need to delay vital changes that could address a major source of consumer detriment.

    “The FCA is right not to loosen the payday loan cap and we have seen a marked fall of in the number of people coming to us with payday loans problems. There are currently over one million people using high-cost credit to cover everyday essentials. We need to ensure that people who need credit for essential costs are able to access products that are genuinely affordable and which don’t push them deeper into hardship. We believe that the Government will need to provide major financial backing to support a low and no interest loan scheme.
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    • #3
      Re: Financial Conduct Authority sets out agenda and priorities for consumer credit

      MoneyAdviceService

      FCA "right to turn its attention" to other forms of high cost credit

      Money Advice Trust comments on FCA review of high-cost credit.

      The Financial Conduct Authority (FCA) has today published the outcome of its review into high-cost credit. The review found evidence that the FCA's cap on payday lending has delivered "substantial benefits to consumers", but found "clear concerns" with other forms of high-cost credit.
      Jane Tully, director of external affairs at the Money Advice Trust, the charity that runs National Debtline, said:
      "The FCA's intervention in payday lending has shown that targeted regulation in the high cost credit market can make a real difference in protecting consumers.
      "The FCA is right to now turn its attention to other forms of high cost credit, as well as unauthorised overdrafts, which have become a common feature of the problems that debt charities help people to resolve.
      "As always, the regulator needs to be mindful of unintended consequences, including potential displacement effects between different forms of credit resulting from any intervention it makes. We look forward to working with the FCA as it develops tailored solutions for different sectors."
      National Debtline offers free, independent and confidential advice 24 hours a day online at www.nationaldebtline.org or on 0808 808 4000, Monday to Friday 9am to 8pm, and Saturday 9.30am to 1pm.
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      • #4
        Re: Financial Conduct Authority sets out agenda and priorities for consumer credit

        Citizens Advice


        Citizens Advice responds to Financial Conduct Authority review of high cost credit

        Today 08:10 The Financial Conduct Authority (FCA) has today published its review into high-cost credit, including measuring the effectiveness of the payday loan cap, which Citizens Advice has responded to.
        Citizens Advice Chief Executive Gillian Guy said:
        “The payday loan cap has protected thousands of borrowers from dangerous amounts of debt.
        “Prior to the cap extortionate fees and charges were trapping people into debt - meaning what was supposed to be a short-term loan turned into a long-term nightmare. Since the cap and other new measures were brought in the number of people seeking our help with payday loan debt has more than halved.
        “But people are experiencing similar problems when taking out other forms of high cost credit - like doorstep loans, guarantor loans and rent to own services - as well as overdrafts. It’s good to see the FCA recognise this and the need for action, we think applying a similar cap would help protect consumers - so strongly recommend the FCA considers this as part of its options for other forms of high cost credit.
        “A decade on from the financial crisis, it is important to keep in mind the lesson learnt by credit providers and regulators of how ‘loose lending’ overburdens households with unmanageable debt. The review of credit-worthiness is a good opportunity to assess whether the tests lenders use to check if people can afford to take out credit are still up to the job - and are being used appropriately.
        “All too often people are being able to borrow money which they can’t afford to pay back. The FCA has rightly recognised that firms should fully consider people’s income and outgoings when deciding whether to lend to them. We’d like also the FCA to turn its guidance on affordability checks into rules that lenders must abide by.”
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        • #5
          Re: Financial Conduct Authority sets out agenda and priorities for consumer credit

          [MENTION=6]Amethyst[/MENTION]

          How will this affect (or protect) consumers whose historic PDL debts have been sold to debt purchasing companies?
          CAVEAT LECTOR

          This is only my opinion - "Opinions are made to be changed --or how is truth to be got at?" (Byron)

          You and I do not see things as they are. We see things as we are.
          Cohen, Herb


          There is danger when a man throws his tongue into high gear before he
          gets his brain a-going.
          Phelps, C. C.


          "They couldn't hit an elephant at this distance!"
          The last words of John Sedgwick

          Comment


          • #6
            Re: Financial Conduct Authority sets out agenda and priorities for consumer credit

            I don't think it will.
            #staysafestayhome

            Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

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            • #7
              Re: Financial Conduct Authority sets out agenda and priorities for consumer credit

              Still think this view stands....

              Originally posted by LegalBeagles 2010 response to LSB re Opt Out plan that never got implemented

              The case for opting-in to unarranged overdrafts.

              We believe that there is an overwhelming preference for opting-in to unauthorised overdrafts as opposed to opting-out.

              Firstly it is important to understand what it is that is being opted-in to or out of.

              During the bank charges test case litigation it was established that bank charges are, in the main, for the service of ‘consideration’ of whether to grant an unauthorised overdraft or not where a payment instruction has been made where there are insufficient funds to meet it. The banks by default, ‘deem’ a payment instruction in those circumstances as an ‘informal request’ for an overdraft regardless of the customer’s true intent. There is no option for the customer to present a payment instruction without it also being deemed as an overdraft request. Indeed no payment instruction exists that actually states that it is also a request for an overdraft either expressly or implicitly. That the banks deem it as such is entirely presumptuous on their part and takes no account of the customer’s wishes.

              This was the banks’ pleaded position, accepted by all three courts. The charges are not for the provision of the overdraft itself for which there is an associated interest charge. The service of ‘consideration’ is uniquely compulsory.

              In any event the vast majority of account holders opt not to use the service of consideration anyway. The OFT PCA Market Study puts the figure at some 80%. Of the remaining 20% who do use it - unknowingly, unwillingly or otherwise - only a very small proportion actually want it. A large poll conducted by MoneySavingExpert of 5952 people found that 92% of people would prefer a payment instruction to be refused without charge than for it to be considered for payment for a fee.

              Should it be that an opting scheme should be designed in such a distorted way that 98% ( approximately 50 million people) have to opt-out rather than the 2% who genuinely want the service have to opt-in?

              Clearly the banks would prefer an opt-out scheme as the take-up would be less than opting-in. This was highlighted by the Barclays Reserve where customers were given the option of opting-out of the scheme by being sent a letter. In the months after the Reserve went live consumer forums were awash with people claiming that they either didn’t receive the letter, missed the vital information within it or simply didn’t understand it.



              1. How important is it for consumers to have the ability to opt-out of unarranged overdrafts on their account?

              We would contend that for those consumers that pay bank charges, it is the most important issue they have with their account. For many opting-out (or in) would give them the single most effective tool with which to manage their finances. Any opting scheme would promote better budgeting for those in financial difficulties.



              Would consumers be prepared to switch accounts or providers to obtain the ability to opt-out?

              Historically switching rates are very low. Regardless of the apparent benefits to some in switching in order to opt-out, the problems perceived by people - as highlighted in the OFT PCA Market Study - remain. These include: Complexity and fear of missing salary or benefits payments & direct debits etc.

              But for many of those that matter it is not so much a question of being prepared to switch but one of whether they are able to. Typically those who incur charges would be unable to close their existing account as it would be in debit because of the charges. There is also a real perception that having a negative bank balance or credit rating would prevent them from being able to open an account with an alternative supplier.



              2. What do you see as the benefits that an opt-out would bring?

              Certainly for those who incur unpaid item fees the benefits are directly financial. But in general:

              * Genuinely more control over finances
              * Improved ability to budget accurately and effectively
              * Greater transparency
              * Better relationships and greater trust between customer and bank

              3. What factors are consumers likely to take into account in deciding whether to exercise the opt-out?

              This would largely be dependent on the nature of the opt-out. If the opt included a blanket refusal of payment instructions due to insufficient funds the biggest factor to be taken into account would be the unpaid bill. But we think it would be easier for most people to negotiate an alternative payment arrangement with, for example, a utility supplier than obtain reasonably priced short term borrowing from their bank.

              If the opt was to be on a transaction by transaction basis (our favoured option) consumers could consider opting to pay essential bills such as mortgages. We believe that any fees incurred should be billed for separately and not simply deducted from a consumer's account.


              4. What risks are there to consumers of opting out and how important are these? These could include: a. Payments being declined even if they take the account just overdrawn b. Fees for returned items

              We cannot accurately answer this question unless we fully understand what the proposed opt-out is. If the opt out does not cover the service of consideration, what does it cover? It cannot only apply to potential paid items that would otherwise take the account into debit because fees for returned items would have the same effect ie bring the account into unauthorised overdraft.

              We would appreciate some clarification.


              5. What are the essential elements that the proposed standards should cover?

              a) That there should be an opt-in as opposed to an opt-out.
              b) That the opt should apply to the service of consideration including paid item and unpaid item fees.
              c) That it should apply to all existing and future current accounts.
              #staysafestayhome

              Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

              Received a Court Claim? Read >>>>> First Steps

              Comment

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