In the bulletin today:
- FCA keynote at Credit Summit 2022
- General Update
- StepChange 4-year plan
- Future of Open Banking
- Sale of Credit Kudos to Apple
- Operational Resilience and ESG
- Debt Resolution Strategies
- CSA Level 3 Debt Adviser apprenticeship scheme
FCA keynote – ‘Supporting consumers through tough times’
Brian Corr, Interim Director of Retail Lending at the FCA, was upfront in the main hall at the Credit Summit and he reinforced a number of the key messages that we have relayed in previous bulletins around not waiting for the Consumer Duty policy rules before getting started. He referenced the Debt Packager intervention, but provided no insight as to the revised timeline for the new policy rules. My feeling was that Brian’s references to collaboration with The Insolvency Service were over-stated.
Quote: “… you don’t need to wait for us to give detailed rules – you can get a head-start now by making sure you have the right mindset, culture and data in place, and looking for gaps between where you are now and where you’ll need to be.”
Credit markets that support consumers
He set expectations around creditor forbearance as more borrowers are getting into difficulty. He reflected that more consumers will need debt solutions, but the FCA also expect to see higher demand for credit. Rising costs may make obtaining credit less affordable for some. Hi message was that people who want to borrow or have already done so will in many cases find it harder to pay off their debts.
He is calling on the consumer credit sector to be more innovative, competitive and focused in delivering the right outcomes for the consumers they serve. There were specific references to recognising the characteristics of vulnerability and the need to respond to customers’ particular needs, as well as providing forbearance and support in general.
The FCA is now running a comprehensive programme on how borrowers in financial difficulty are treated so that they can ensure those who need help are getting it. This covers lending products across and beyond consumer credit, including firm surveys, in-depth discussions with firms and consumer research. This will put more MI demands on regulated firms, responding to data and survey requests and engaging with the FCA on what they’re seeing. The FCA confirmed that they are thinking carefully about the implications of the rises in the cost of living and increasing pressure on consumers as they take this project forward. The FCA webinar (‘The Future of Financial Services with Data and AI’) on 22/3/2022, involving the Bank of England, also discussed the data demands being put on regulated firms.
Brian spent some time on consumers that can’t access regulated credit products and he referenced collaboration with the Illegal Money Lending Team (IMLT). We have recently featured presentations by IMLT and collaborations with the Vulnerability Registration Service (VRS). To support regulated lenders, the FCA is considering how they can help firms better understand their expectations and how to apply the emerging rules in practice so they can be compliant and sustainable.
There has been a lot of communications on Debt Awareness Week, which has been excellent.
The Chancellor made his Spring Statement during the course of the Credit Summit 2022 and I have covered some of the outcomes further down from HMRC, PayPlan and the CSA.
Link: https://www.bbc.co.uk/news/business-60819205 – Spring Statement
In January 2022, the Joseph Rowntree Foundation (JRF) published a report on UK Poverty. This has featured in many media reports and is likely to become referenced more frequently a living standards are impacted by the cost of living changes.
NatWest enter BNPL market
NatWest is to enter the UK’s BNPL space this Summer, promising to put safeguards in place to ensure responsible lending. Gambling, cash advances and balance transfers will be excluded from the roll out, which will initially be made available to the bank’s customers in England, before heading north to Scotland and across the Irish sea to Northern Ireland. The product will offer a pre-determined fixed credit limit and customers will be able to keep track of payments and installment plans via the bank’s mobile app. We are expecting a number of announcements from the CRAs, after the TransUnion statement, around how BNPL data will become available to both lenders and consumers. I spoke with Experian last week in advance of my Open Banking presentation and the references to the FCA Credit Information Market Study. Experian confirmed good progress on how BNPL information will be made available. NatWest says it will use credit scoring and affordability checks to determine each customer’s credit limit in the first instance.
LSB has stated that new statistics show people aged 20–39 are most vulnerable to fraud with online shopping scams being the most reported – meaning the power of prevention lies with all firms in the customer journey. I featured a range of fraud types that are prevalent in 2022 in my Open Banking presentation. This is an increasing part of the responsibility of digital providers, as reflected in the FCA speech.
The future of insolvency regulations consultation closed on 21 March 2022. The Insolvency Service is now analysing the feedback.
The Public Accounts Committee said the total UK tax debt was £39 billion – more than double the amount at the start of 2020.
It said HM Revenue and Customs must pursue businesses and individuals who were choosing not to pay their taxes while supporting those still struggling with the impact of the pandemic.
NCSC – Cyber Aware
A milestone number of suspect emails reported by the British public marks the launch of a new Cyber Aware campaign. Savvy consumers have reported over 10.5m suspicious emails to the UK’s cyber experts, resulting in the take down of 76,000 online scams. Scams related to the NHS, online delivery companies, cryptocurrency investments and more have all been stamped out thanks to public reports to the NCSC.
StepChange 4-year Strategy
This sets out a 3-stage plan over a 4-year period. This takes account of deployment of Statutory Debt Repayment Plans (SDRPs) in 2024 as part of stages 2 and 3. Immediate priorities are preparing for the MaPS debt commissioning environment. Service improvements including wider usage of Open Banking are referenced in stage 2.
Phil Andrew, CEO of StepChange, has reflected in the main document that the introduction of SDRPs will provide a catalyst both to cost reduction and innovation. I feature this in the last slide of my Open Banking deck. By 2025, StepChange is anticipating 350,000 debt advice sessions per annum from a starting point of just under 200,000 at the end of 2021.
As with many firms in our sector, the impact of hybrid working is being looked at as a long-term regime and will form part of the wider social value strategy, including workplace wellbeing and goals in diversity and inclusion with a wider talent pool. I covered a number of the FCA expectations in thought pieces in Q4 2021.
Further to my section on ESG below, StepChange is creating an Environmental Social Governance (ESG) strategy that includes their position on the environment and how they will measure and reduce their carbon footprint.
Pages 30-31 set out the StepChange roadmap from 2022-2025. Some interesting milestones and deliverables along the way, including embedding AI/ML in their customer journeys. As a follow-up to Peter Wordworth’s recent article, StepChange is implementing its new Voluntary Arrangement strategy at the end of 2022.
The future of Open Banking
I touched on this in my presentation on Open Banking at the Credit Summit. HM Treasury, the Competition and Markets Authority (CMA), the FCA and the Payment Systems Regulator (PSR) have published a joint statement on the future of Open Banking.
They have confirmed that Open Banking has led to greater competition and innovation in UK retail banking, bringing real benefits to consumers and businesses. The Government and regulators are committed to supporting the continued growth of Open Banking, which includes the proposed constitution for the future open banking entity to ensure a smooth transition from the OBIE to the new entity once set up. They have also announced the creation of a joint regulatory oversight committee led jointly by the FCA and the PSR to deliver this.
The CMA publishes at the same time its response to the CMA consultation on the future oversight of Open Banking.
Sheldon Mills, Executive Director, Consumers and Competition, of the FCA, said:
“Open Banking is delivering real benefits for consumers and businesses. As co-chair of a new oversight committee, my focus will be on maintaining the progress it has so far achieved in encouraging innovation and competition.”
HM Treasury, the FCA, the PSR and the CMA agree that the future entity should:
- Have effective regulatory oversight, with a new Committee, led jointly by the FCA and PSR, to consider the entity’s vision, governance and priorities
- Be independent, well-governed and underpinned by a set of values and cultures that include an emphasis on integrity and promoting ethical behaviours
- Play a central role in delivering new proposals beyond those required by existing regulations
- Be adequately resourced to carry out its functions through a more broadly-based and sustainable funding model
- Effectively serve the interests of consumers and businesses, including consideration for how these groups will be represented on the Board
The consumer manifesto is important – https://www.openbanking.org.uk/news/consumer-groups-create-manifesto-open-banking/
Sale of Credit Kudos to Apple
The news broke the night before Credit Summit 2022 and I had to make a few hasty changes to my slides. The news featured as one of the top ranked questions on the Q & A system in my first session as chair on Open Banking. The deal closed earlier this week. One source said it valued the startup at about $150 million, a significant uplift in valuation. Credit Kudos was launched in 2015 by founders Freddy Kelly and Matt Schofield.
Operational Resilience and ESG oversight dashboards
My thanks to Ian Wilson of Triline GRC for the demonstration yesterday of their dashboard tools around Operational Resilience and ESG. Both very topical aligned with the emerging requirements for tracking KPIs and key outcome metrics from the Consumer Duty. Operational Resilience requirements impact a number of regulated firms by the end of March 2022. The tools are being embedded by several challenger banks.
This is very relevant to some of the key underlying messages from the FCA in terms of stepping stones to being able to evidence progress against emerging FCA expectations through a very tough economic period where the financial and operation resilience of firms will be assessed alongside the risks of poor consumer outcomes. New metrics around the Consumer Duty under PRIN 12 will need to evolve quickly, especially in terms of inclusive product design and measuring whether different treatment paths are delivering expected outcomes and where they are not, what was done to address this.
I have copied Ian on the email if anyone is interested in a similar demo of either the Operational Resilience or ESG dashboards. I can see the latter will be of interest to private equity investors as emerging reporting standards bed in. I saw considerable merit for those with contract management obligations that include supply chain management and social value obligations. It is interesting that StepChange has set out in Stage 2 (into 2023) of their journey that they will quantify the value and impact of positive results from clients and funders, by developing a comprehensive Social Return on Investment (SROI) model. This all forms part of the ESG policy and strategy I discussed in my thought article (attached).
Crown Commercial Services has stated that “Social value in procurement is about making sure that what you buy creates additional benefits for society”. The Social Value Act 2012 states that all public bodies must consider how what they are proposing to buy might improve economic, social and environmental wellbeing. The legal requirements of the act are quite limited, and many public organisations choose to go further than just ‘considering’ social value, and actively apply the principles across their procurement activities. This is applicable to the MaPS tendering process referenced by StepChange in their 4-year plan.
I found this AWS carbon footprint tool of interest.
Debt Resolution Strategies
A new survey by the CSA has found that member firms expect to either explore or adopt new communications technologies in the coming years, which will afford customers a broader range of options to engage and discuss their debt. Despite the move toward digital solutions, the diversity of customers that collections firms encounter means that traditional methods of communication such as telephone calls and letters will continue to play a significant role in the process, to ensure that no customers are left behind.
The CSA identified some blockers to wider adoption of digital strategies and state that MaPS should explore Open Banking opportunities for centralising I&E. Along with the DEMSA presentation, there is a reliance on customer consent, where there can be an understandable reluctance to grant collections and purchase firms consent. They state that this feels like a policy area with scope for MaPS to build on its work with the Standard Financial Statement (SFS) and develop a trusted and reliable solution in partnership with a suitably-equipped tech supplier. My feeling is that we have those suitably-equipped suppliers and that was one of the objectives of the Crown Commercial Services ‘Debt Resolution Framework’ to find providers that meet a high-quality standard and who are committed to future innovation and quality standards, including emerging ISO standards around inclusive design and vulnerability assessments. Given that we still have many local government agencies still not using the SFS then there need to be multiple strands of activity that don’t inhibit those committed to innovation and consistency of use of the tools available.
This comes in a week when Arjun Mitra of Firstsource has questioned whether the UK has made as much progress in digital debt resolution solutions as it should have done as a pioneer of open banking and digital technology. The inference is that firms have focused on the onboarding process and left the back-end behind. I have some sympathy for this view as well and this featured in my presentation around the product/service lifecycle and the FCA inclusive design models. I have yet to respond to Arjun. Some of the digital guys may want to get in ahead of me. I have posted his article on the Credit Kudos acquisition by Apple. Having read the tone of the CSA report, I would be inclined to agree with Arjun. I am fortunate enough to see first hand some of the developments in this space and I think that 2022 will see meaningful changes in approach driven by the cost-of-living crisis, lessons learned from the pandemic and the expected impact of the Consumer Duty.
Link: https://www.linkedin.com/feed/update/urn:li:activity:6912409204423045120?updateEntityUrn=urn%3Ali%3Afs_feedUpdate%3A%28V2%2Curn%3Ali%3Aactivity%3A6912409204423045120%29 – Is the UK lagging behind on the digital transformation of collections?
Common Financial Statement in Scotland
As a build on a recent DEMSA bulletin, the AiB has published its press release on the update to the Common Financial Statement in Scotland. AiB will adopt a flexible approach for a period of one month after 1 April 2022 as a transitional arrangement for advisers updating their systems and processes.
As part of my après-event networking, I caught up with Bruce Curry from FICO and thought I would feature his recent Blog on improving collections through performance predictive analytics.
CSA Level 3 Debt Adviser standard
Fiona’s team at the CSA has been pushing the Debt Adviser apprenticeship scheme this week.
IE Hub new client For ScaleUp Group
Congratulations on IE Hub raising another £1m. ScaleUp Group (SUG) announced the completion of a £1m Seed Funding round for IE Hub, with around 25% co-invested by SUG Partners. The commentary reflects the investors view that financial services firms will have to adapt to Consumer Duty Regulation changes within the next year. Dylan’s comments add weight to my thoughts on the CSA report above.
PayLink Solutions/EcoSpend collaboration
PayLink Solutions and EcoSpend announced their collaboration just before my presentation. Luckily, Susan Rann, Andrew Alder and Sarah Lambert were all towards the front of the Westminster room when I delivered by presentation after the Chancellor had delivered his Spring Statement.
Spring Statement updates
HMRC were fairly quick to issue their key points from the Spring Statement. Key measures the Chancellor announced as part of the plan include:
- an increase to the National Insurance Primary Threshold for Class 1 NICs and the Lower Profits Limit for Class 4 NICs from 6 July 2022, aligning it with the equivalent income tax personal allowance which is set at £12,570 per annum
- from April 2022, self-employed individuals with profits between the Small Profits Threshold (SPT) and the Lower Profit Limit will not pay Class 2 NICs, while allowing individuals to be able to continue to build National Insurance credits
- the Employment Allowance will be increased by £1,000 from 6 April 2022 to £5,000, which will benefit around 495,000 businesses
- an immediate reduction in duty on diesel and petrol from 6pm on 23 March 2022, by 5 pence per litre, for 12 months
The CSA and PayPlan also provided updates.
IncomeMax innovation award at 2022 British Credit Awards
A very popular announcement that IncomeMax were Innovation & Technology Award winners at the 2022 British Credit Awards. I have featured Lee Healey’s post below. This has been supported by technical innovators on the circulation and I hope to be able to cover more on this in due course. Lee has been in the media recently with the rise in profile of Link: https://www.linkedin.com/posts/incomemax_rapidrecoverychallenge-bca2022-bcawards2022-activity-6913106761134534656-cQtk?utm_source=linkedin_share&utm_medium=member_desktop_web
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