A couple of weeks ago, we shared what we would have been saying at Labour Conference. Now we turn our attention to the Conservatives. Like other political parties, their conference is taking a very different format this year, but here we share our thoughts.
With the Conservative party, our engagement would focus on the problems we see with the current regulatory framework, much of which has been introduced under Conservative governments since 2010. Problems with the structure now call into question the future of the sector, which we would want to bring to the attention of a business-minded government. We would also want to talk about the important contribution credit makes to the economy, something that has been brought into sharp focus by the Covid-19 pandemic.
The regulation of short-term credit has changed dramatically in recent years, to the point where the product has become one of the most regulated across the financial services sector. These changes caused great uncertainty and increased costs for lenders. Add in historical complaints and a varying interpretation from the Financial Ombudsman Service (FOS) and it has been difficult to find any period of stability to let these changes bed in.
Lenders – both large and small – have left the market as it was no longer viable to continue. This will undoubtedly affect the supply of credit available to customers. We know that when supply falls the need is still there, so consumers look elsewhere. Often at less desirable alternatives.
To avoid further damage to the short-term credit market, we need to find solutions to stabilise the regulatory environment and deliver some certainty. This is not an appeal for looser regulation, it is a call for more definition from the regulator so that interpretations of principles are not altered over time or between individual regulators.
As mainstream lenders tighten their risk appetite in light of Covid 19, we need to be mindful about the role short-term credit plays in the management of finances. In the UK, we have created an economy and a labour workforce built upon the foundations of flexible working. This brings with it fluctuating incomes and associated expenditure. Credit is needed to manage these patterns over time.
The pandemic has damaged that economy in ways no one could have predicted. The use of credit is not only valuable to individuals, but society in general and the economy. Credit fuels economic recovery which is so desperately needed now.
The industry needs to confident that the Conservative Government recognises the need for short-term credit and can assure a period of regulatory certainty to allow businesses to operate. This will allow our section of the credit market to continue to serve customers while also contributing to growing the economy once more.