Usually party conference season sees members of the CFA team travel to different parts of the country. We go to conference to represent the interests of our sector and engage with elected officials.
Conference is a great opportunity to learn more about a party’s current thinking on policy. It is also the only real chance during the year to connect with the party base and understand the issues concerning them at a grassroots level.
Like so many events due to take place in 2020, the party conferences have been cancelled due to the Covid 19 pandemic. Most political parties have opted for some form of virtual event, and we will engage where we can, but it will be impossible to recreate the unique nature of conference.
If we had been able to attend in person, there are a few key points we would have been looking to get across in our various meetings. These focus on the customer need for short-term credit and the negative impact of not being able to access it.
The risk for politicians is that they will only hear about credit when it goes wrong, and when constituents approach them for help. For many families, short-term credit is an important tool in balancing their budget.
The demand for short-term credit exists because it meets the needs of a specific group of customers. This need is different to that of traditional lending, possibly not available from banks. In many cases these customers do not want to use mainstream credit or have had negative experiences in the past. Often, a small amount of credit is only required for a relatively short period of time.
This is used to cover unplanned expenditure, including unexpected costs, or a temporary shortfall like waiting for a commission payment. Borrowing can be used to enhance economic welfare by allowing smoother consumption over time.
This is about making sure the car can get you to work or getting a higher than average electricity bill paid, the alternative being job less or a default on their credit file.
Access to Credit
Some aspects of the current regulatory structure, along with high numbers of historical complaints largely driven by claims management companies, mean we are seeing a decline in the supply of short-term credit.
While demand is currently suppressed during lockdown, when things look a little more normal customers might find it hard to access credit. Some mainstream lenders will seek to avoid risk in uncertain times and tighten their lending criteria. It is often Labour constituencies that are worst served by mainstream lenders.
With a reduction in access to credit, we are likely to see a rise in the more unsavoury alternatives. Borrowing from friends and family is likely to increase. This type of borrowing can damage family relationships and for some is simply not an option.
These consumers may turn to illegal lenders, where there is no protection for the borrower. This has been the experience of other countries.
There needs to be a real conversation about how credit is used and why it remains vital to so many. Customers need to be able to access a range of safe, competitive products, whilst also having support systems in place for those that it would not be right to lend to.
We are always happy to meet with politicians to discuss the sector. If you would like to learn more about the sector, please do get in touch.