While the authorisation process uncovered shocking practices in high-cost, short-term credit, lenders can now be proud of the changes made, says UK general counsel at Dollar UK Andy Smith.
The high-cost short-term credit market has had an interesting few years, to say the least.
In 2014 it came under Financial Conduct Authority (FCA) regulation, with the government’s express aim of getting rid of rogue lenders. As part of this, interest rates were capped, and changes to affordability assessments and collections practices were enforced. No longer could outstanding loans simply roll over indefinitely, or companies harass individuals unable to pay.
At Dollar UK, we welcomed these changes, and the positive impact they had in clearing up the marketplace – both on the high-street and online. Many rogue lenders stopped trading at this point, under no illusions that they would be able to remain profitable under this new regime.
But FCA regulation meant more than just this. To continue trading, every lender would need to be assessed by the regulator and granted authorisation. If not granted authorisation, continuing to trade would overnight become breaking the law.
Dollar UK’s authorisation process took place throughout 2015, by which point we had long welcomed regulation and put in place many measures that went over and above the FCA’s rules. For example, we scrapped default fees altogether, and ensured there were no hidden charges. We were then – and still are now – proud to put the customer first, to integrate corporate social responsibility into everything we do and contribute to the communities we operate in. We sought to lead by example and help professionalise the industry further. Nonetheless, we breathed a sigh of relief when the FCA granted us authorisation in 2016. It was an endorsement of the changes we had made, and the commitment to serving our customers and communities well.
But a firm that saw authorisation as anything but the start of the journey would be seriously deluding themselves. Like a football team promoted to the premiership, you have to continue investing in talent and infrastructure, and training for each match like it’s your last.
So a year on from authorisation, what has this meant for a consumer finance firm whose only link to a football pitch is through our sponsorship of Wolves FC?
Sense of renewal
Firstly, our commitment to continually improving our service to customers has seen us renew our offering on the high street with concept stores that offer customers a better environment and more privacy as they discuss sensitive matters. We have also invested in our collections contact centres, one of which has even been certified by the British Psychological Society, and introduced a cloud solution system.
The authorisation process has been a learning curve, and has meant we received regular feedback from the FCA. What we also learned is that we can be an important resource to the regulator too. As a firm, we know our customers, and that has given us the ability to assist the FCA in understanding them, and how our product mix and service ethos meets their requirements.
Our ongoing relationship with the FCA as a result of authorisation means we are in a position to let them know where regulation is having a positive effect.
Indeed, these changes have made a considerable difference to the sector, but most importantly to consumers.
Research released by the Social Market Foundation and commissioned by the Consumer Finance Association in 2016 showed that on average, the cost of borrowing dropped £36 for a 30-day loan, and 92 percent of customers now borrowed without incurring any additional fees.
We will see further developments to the journey this year when the FCA publishes feedback it has received on the price cap and continues its work on affordability.
One year on from authorisation, the picture may not be completely rosy, but the company and the industry as a whole is a far cry from where it was in 2014. For this, we should all be proud.