CONSUMER LENDING
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Keeping up with the sheer volume of regulations can be a challenge
consumer credit only four years ago, the Financial Conduct Authority (FCA) is very active in overseeing the sector. “The regulator is still sitting forward in its seat and consumer lending is very much under the spotlight,” he continues. “A phrase used a lot by the regulator is ‘consumer harm’, and that can be more prevalent in consumer lending.” An energetic regulator means plenty of changes to stay on top of. For example, the FCA is working, says Coley, on a new definition of vulnerable customers which will be based on making an assessment of people’s financial resilience – the more resilient, the less susceptible to harm. It’s also investigating the use of technology such as voice analytics to try and spot callers who might be confused, or
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have misunderstood what lenders are offering them. “Keeping up with the sheer volume of regulations can be a challenge,” says Coley. The other factor that is never far away from any discussion about the prospects of consumer lending, is the UK’s rising level of debt. According to a report published by Coley’s PwC colleagues late last year, unsecured UK consumer debt grew at 11 per cent in 2017 to hit £300bn, some 30 per cent more than its pre-2008 crash peak. That’s an average of £11,000 of unsecured debt per household. That’s a lot of debt. But for everyone who thinks it is too much, there are others for whom it’s simply the natural consequence of wider factors. “Why is debt rising? It’s the low interest rate environment,” says Orca’s Niblock. “The
government is keen to encourage spending, and more lending means more money in circulation and more spending. So that’s a clear reason – interest rates are low and so the cost of debt is low.” Lending Works’ Harding adds that no lender can afford to be complacent about the wider credit conditions. “There has been some commentary about inflated credit, and I never take commentary from trustworthy sources like the Bank of England or the regulator lightly,” he states.
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But he also points out that the type of debt – and debtor – is important in assessing those conditions. “There’s always an immediate concern ‘Is this the start of the next cycle?’” he adds. “But it’s not as negative as it’s been painted – the flipside is that the regulator has also said that credit is growing in the right places, with prime borrowers who can afford to pay it back.” After all, providing easier access to better products and services for customers and investors is what everyone in P2P wants, regardless of whether they are consumer or business lenders.