In today’s bulletin
- General update
- MaPS request to debt adviser panels
- Breathing Space – Northern Ireland
- Consumer Duty
- Training
- Events
General update
On 21 February, Ofgem will publish an update on the scope and timelines of its Market Compliance Review on prepayment meter warrant installations and remote mode switching. The energy watchdog has said suppliers’ suspension of forced prepayment meter installations will last for the next 6 weeks.
According to StepChange, struggling households borrowed £11 billion to cope with the cost-of-living crisis in 2022 and are cutting back on essentials to keep up with the repayments.
Link: https://www.stepchange.org/media-centre/press-releases/two-in-five-people-rationing-essentials.aspx
I have been following the posts by Caroline Wells this week as she returns to commuting to London. She prompted me to buy some more comfortable black shoes for upcoming events in London.
Private rent
A third of buy-to-let landlords expect to sell property this year, according to the National Residential Landlords Association (NRLA). The NRLA has called on the government to make changes to the tax system to prevent the supply of rental homes falling further. Demand from tenants has increased 53%, while the number of properties available to rent has fallen 38% since 2019, according to Rightmove. Landlords sold 35,000 more properties than they bought in 2022 due to high mortgage costs and tax changes. 68% of landlords plan to raise rents if their mortgage rate goes up when they come to remortgage.
This comes as online estate agent Purplebricks is up for sale after revealing it expects to lose between £15-£20m this year.
Council tax and pay rises
We have also seen reporting this week on the high proportion of councils that will increase council tax by the maximum amount of 5%. The County Councils Network (CCN) found three-quarters of English councils with social care duties that have published budget details are planning a 5% rise. At the same time, HM Treasury has stated that public sector pay rises must stay below 5% to control inflation. ONS has already flagged the gap between inflation and pay rises. Price rises in the UK fell to 10.1% in January 2023, down from 10.5% in December 2022, although inflation still remains near a 40-year high. UK wages increased quicker than expected at the end of 2022, with average earnings excluding bonuses 6.7% higher in the 3 months to December 2022 compared with 2021.
BNPL
The government has announced its intention to regulate interest-free BNPL products. The proposed draft legislation will bring BNPL into FCA regulation, with consumers being given the new right to take complaints to the Financial Ombudsman Service (FOS).
The draft legislation is expected to help protect around 10m customers, as providers could be required to give consumers key information about their loans and issue credit that is genuinely affordable. The BNPL sector nearly quadrupled during the pandemic in 2020 to £2.7 billion, and nearly £1 in every £8 spent online last month used BNPL services, according to Adobe Analytics.
The government’s consultation response confirmed that merchants which introduce their customers to the agreements which will now be brought into regulation will be exempt from credit broking regulation. For BNPL providers, the government is proposing a temporary permissions regime (TPR).
The relevant regulated activities will be:
- entering into a regulated credit agreement as lender
- exercising, or having the right to exercise, the lender’s rights and duties under a regulated credit agreement
- credit broking (for domestic premises supplier merchants that offer newly regulated agreements).
Credit reporting is referenced and aligned with the work the FCA is doing on the Credit Information Market Study. The main providers are now sharing data with Experian and TransUnion.
The consultation closes on 11 April 2023. I have attached the consultation paper.
Amigo Loans
It is difficult to avoid spotting the stories around Amigo Loans avoiding the £72m fine. They still face FCA censures over historic affordability checks. RewardRate (https://www.rewardrate.com/) looks to be the new trading style of Amigo Loans. RewardRate loans range from £2000 to £10,000 over terms between 24 and 60 months, with a maximum APR of 39.9%. A Trustpilot rating of 3.7. Several 5 star ratings and several scam ratings.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
“Amigo failed to assess properly the affordability of its lending, especially to vulnerable consumers, as our rules required. This led to lending that was unaffordable for some and meant guarantors had to step in. It also had the effect of prioritising the firm’s commercial interests over the obligation to comply with the rules and safeguard customers from unaffordable loans.”
The FCA found that 1 in 4 of Amigo’s guarantors were asked to step in and make payments to assist struggling borrowers at some point during the term of the loan.
Financial Ombudsman Service publishes its latest quarterly complaints data
On 15 February 2023, FOS published its complaints data on financial products for October – December 2022 (Q3). In Q3, it upheld 35% of complaints in the consumers’ favour. They received 41,303 new complaints in Q3, up from 35,342 new complaints in the same period in 2021/22.
The top 5 most complained about products were:
- 6,082 complaints about current accounts, compared to 5,522 complaints in Q3 2021/22
- 3,216 complaints about credit cards, compared to 3,263 complaints in Q3 2021/22
- 2,987 complaints about hire purchase (motor), compared to 1,321 in Q3 2021/22
- 2,769 complaints about car or motorcycle insurance, compared to 2,178 in Q3 2021/22
- 2,493 complaints about running account credit, compared to 233 in Q3 2021/22
‘Running account credit’ seems to have jumped year-on-year. FOS has focused on the rise in hire purchase (motor).
As previously reported in the bulletin, in December 2022, the FCA issued a statement warning insurers not to undervalue cars or other insured items when settling claims.
As we are in the process of responding to CP23/5 (Debt Packagers), I will refer again to the very low volumes of complaints and below average uphold rates about debt advice and debt adjusting. The FCA has suggested in its response to CP21/30 that we should ignore complaint levels about debt packagers (with debt advice permissions). I find this difficult to do when it is a key outcome metric in the Consumer Duty (FG22/5). The FCA has suggested that debt packager firms representing two thirds of the market in customer numbers have either left or suspended their activities, since the FCA first raised concerns in July 2021. Market statistics don’t support this.
| Product | Enquiries | New cases | Cases referred for an ombudsman’s decision | % of cases upheld |
| Debt Adjusting | <10 | <10 | – | – |
| Debt Collection | 290 | 167 | 19 | 31% |
| Debt Counselling (inc. Debt Management Plans) | 20 | 13 | <10 | <30% |
I have attached the whole spreadsheet.
A snapshot of how we communicate
The graphic above caught my eye from a FourNet post and blog. The article explores chatbots & virtual assistants, which is something Chris Warburton and I are about to start looking at in more depth.
“This technology has been developing at a rapid rate over the past years and conversational artificial intelligence Chatbots are leading the way. Conversational AI refers to the use of artificial intelligence technology to enable natural language conversations between computers and humans. It can be used in various applications, such as virtual assistants, chatbots, voice-activated devices, and customer service interactions. The goal of conversational AI is to provide a seamless and human-like communication experience, allowing users to interact with machines in a more intuitive way.”
We are exploring the state of natural language processing (NLP), machine learning, and speech recognition.
Link: https://fournet.co.uk/news-events/2023/02/13/how-technology-empowers-relationships/
Angel Advance mortgage guide
Angel has put together a handy guide to tackle some of the key points relating to mortgages.
According to UK Finance, experts have advised homebuyers applying for a mortgage to speak to their lender as the cost of fixed-rate mortgages have fallen since the start of the year.
Link: https://www.angeladvance.co.uk/help/mortgage-guide
MaPS Debt Adviser Panels
I received the email below from Francis McGee at MaPS on 13 February 2023 regarding debt adviser participation in panels they are setting up. Several on the circulation have already responded. Erika has confirmed they are interested in dual regulated (e.g. FCA and IPA/ICAS/ICAEW) firm participants. We have a number of members in this category. I have committed to promoting this, as requested below.
Dear Kevin,
I hope you are well. I’m sure you will have seen that MaPS’ new funded debt advice services went live successfully on 1 February. I’d be very happy to talk you through the latest developments if that would be useful.
Meantime, I write to ask for a bit of help with something. You might have seen or heard that MaPS wants to recruit two Debt Adviser Panels, to obtain feedback and insights about current and emerging issues from the frontline. Once recruited, panel members will work with MaPS in an advisory capacity, to inform its future approach to debt advice commissioning and other topics relating to its statutory objectives for debt advice.
The IMA has agreed to help MaPS identify potential Debt Adviser Panel members, and that has generated a good amount of interest already. In parallel with that, we’re trying other approaches. To make sure our Panels are truly representative of the whole sector, we are keen to attract advisers who:
- work for non-MaPS funded organisations as well as those we fund
- support clients in digital and telephone channels, as well as those who work face to face
- are from commercial providers
- have different levels of experience, including those who are relatively new to debt advice (2 years’ experience or less).
We’re asking interested advisers to complete this survey: https://www.smartsurvey.co.uk/s/ExpertDebtAdviserPanel/ which will be open until 31 March.
Would you be willing to draw the opportunity to the attention of your members? There’s a bit more background below, drawn from the introduction to the survey.
We know debt advisers are passionate about their work and are motivated to help their sector develop, so we are sure this opportunity will be of interest to many advisers. For advice organisations, the benefits include having people involved who are familiar with the widest possible range of delivery and customer relationship models.
If there’s anything you can do to help us promote this opportunity, we’d be really grateful. If you have questions or concerns before doing so, I or my colleague Erika (copied in) would be happy to help. Erika is masterminding the Panels for us.
Thanks very much.
Francis
The Money and Pensions Service (MaPS) wants to recruit two Expert Debt Adviser Panels, to obtain feedback and insights about current and emerging issues from the frontline. Once recruited, panel members will work with MaPS in an advisory capacity, to inform its future approach to debt advice commissioning and other topics relating to its statutory objectives for debt advice.
Smaller panel
The first panel, a small expert cohort of 12-15 people, will work with MaPS on some of the big strategic questions that need to be addressed. This group will meet every month to six weeks or so, for 2-3 hours and is likely to involve some additional work between meetings, such as reviewing or contributing to draft documents. This smaller panel will meet for the first time on 27 March 2023, when it will agree how the panel and MaPS will work together.
Larger panel
The second, much larger group of debt advisers, will form an online expert panel who will participate in a monthly online survey to provide real-time insights on issues like adviser wellbeing as well as views on some of the emerging thinking from the smaller panel. From time to time, and always subject to adviser availability, MaPS may also want to work with sub-sets of this larger group, e.g. a group of webchat advisers or those delivering advice in rural communities, to explore specific topics. This larger panel is expected to be up and running by late April.
MaPS intends to engage with both panels initially through to 31 March 2024. Whilst MaPS is unable to pay Debt Adviser Panel members, it hopes to finalise alternative incentives shortly and will explore these further with the smaller panel.
MaPS is committed to reviewing how the Debt Adviser Panels and other forms of adviser engagement are working, with a view to continuing and/or improving how it engages with frontline advisers after the initial period.
––––––
Francis McGee | Sector Engagement Lead | Money & Pensions Service, 120 Holborn, London EC1N 2TD
e: francis.mcgee@maps.org.uk or Erika Helps Erika.Helps@maps.org.uk
Call for Evidence – Breathing Space in Northern Ireland
The Call for Evidence ran from 14/12/2022 to 1/2/2023. The Call for Evidence was the first stage in an ongoing public engagement process. The Call for Evidence document set out the current understanding of the evidence available relating to a future debt respite scheme for Northern Ireland (NI). They had wanted to embrace Statutory Debt Repayment Plans (SDRPs) as well.
As we are all aware, “problem debt” is when people who find keeping up with their regular bills and credit commitments a “heavy burden”. It is associated with a range of negative factors for people including poor mental wellbeing, health and recovery and causes relationship issues. It also has a negative effect on society and the economy. Debt advice, which includes a range of debt solutions in NI (similar to England & Wales), can help indebted individuals deal with their debts and return to a stable financial footing.
The Financial Guidance and Claims Act 2018 transferred responsibility for policy, funding and the commissioning of debt advice services to Scotland, Wales and NI from 1 January 2019. HM Treasury allocations are made on the basis of the share of adults likely to need debt advice. For NI this has been estimated to be 175,679 adults per annum for 2022. The need for debt advice is defined in terms of people being behind in at least one priority bill, facing early or late-stage creditor action and using credit for the essentials.
The Department for Communities has been funding the debt advice service through Advice NI since 2019 to date, helping around 14,267 people struggling with problem debt of approximately £139 million in that time. The consultation drew on a lot of the work undertaking in launching Breathing Space in England & Wales and the outcome of the Statutory Debt Repayment Plan (SDRP) consultations that closed in late 2022. They have referenced the StepChange breathing space review from 2022.
I will monitor any outcomes.
Link: https://consultations.nidirect.gov.uk/dfc/debt-respite-scheme-call-for-evidence/
Link: https://www.stepchange.org/policy-and-research/breathing-space-review.aspx
Consumer Duty
UK Finance has published a timely blog around ‘Fair Value’ and its compatibility with risk-based pricing. Definitions first. Risk-based is pricing that adjusts based on the expected losses for a given customer. This is driven by quality customer risk assessments. Credit providers will have a allotted ‘segments’, which can range in complexity for a couple of segments to very granular approaches.
UK Finance has suggested that there are key questions that providers need to ask themselves about how they carry out risk-based pricing, and any deviations around it. Here are a few of them:
- For higher risk customers charged the highest prices, are they still receiving a good outcome?
- How are customers re-priced (up and down) as the level of risk changes?
- Do customers across different segments receive a fair price given their risk?
- Where there are deviations from risk-based pricing, is there a ‘fair value’ justification for these?
At the margin of credit provision for the highest risk customers, questions need to be asked about whether the access to credit is in customers’ interests. Providers need to reflect holistically on the likely outcomes for such customers (including the rates and consequences of default) and whether credit is a suitable product. It is apparent that the FCA is looking at this in the premium finance space where essential insurances (e.g. motor, building) are required from an affordability perspective, but often subject to very high APRs. There may be some instances where alternative finance (e.g. NILS) may be applicable, subject to eligibility. Some of this is covered in the exemptions in the BNPL consultation around premium financing without interest.
UK Finance look at the sort of questions and issues that are at the heart of the ‘price and value’ outcome, with the FCA looking for providers to reflect on and explore their approach and the outcomes for customers. These are challenges for the commercial debt management sector and the FCA has previously communicated with DEMSA that reviews of contracts and T & Cs will be a critical assessment before July 2023. No doubt the impending “Dear CEO” letters to the sector will outline this in more detail.
The FCA supervision page below is worth monitoring by sector.
Link: https://www.fca.org.uk/about/how-we-regulate/supervision/supervisory-correspondence
Link: https://www.ukfinance.org.uk/news-and-insight/blog/risk-based-pricing-and-consumer-duty
Consumer Duty Training
The next round of Consumer Duty training commences on Monday 20 February 2023. Kirstie and Heidi are organising and are copied if you are interested in any of the dates below.
Please choose one date from the list below (all £195/person/session or £150/person/session when booking for more than one person from the same organisation):
- 27 February 2023, 1.30-4.30pm
- 13 March 2023, 1.30-4.30pm
- 20 March 2023, 1.30-4.30pm
Events
VRS Local Authority event recording from 13/2/2023
Kirsty has kindly published the recording of this VRS event. Copies of the presentations are available from Kirstie, including Caroline Thomas from FourNet, Kent County Council use of VRS and Helen’s presentations on VRS and dispelling GDPR myths.
Link: https://www.youtube.com/watch?v=5am0a4tRKWA
Housing Association webinar
I picked up on a post by Arum around an Elifinty sponsored webinar on Housing Associations. The panellists included: Matt Dronfield (Debt Free Advice), Maysam (Elifinty), Muna Yassin MBE (Fair Money Advice ) and Steve Coppard.
Online Collections Technology Think Tank 4.1 – Thursday 23/2/2023
I am speaking in Session 4 for the Credit-Connect event on 23 February 2023. We had our rehearsal on Friday. We are covering the cost-of-living challenge and what is the future for digital collections. Chris and I have been exploring the importance of omni-channel and what industry innovations we will see in 2023 and beyond. This links to my 2023 horizon scan circulated at the start of 2023.
Speakers include Jamie Buckley from StepChange and Ian Parry from Utility Collections.
Link: https://www.credit-connect.co.uk/collections-technology-think-tank/
Credit Strategy Credit Summit 2023 – 16/3/2023
I have been asked to speak around Collections Strategies. Venue is the QEII Centre. Roma Pearson is speaking from the FCA. I am on with Sam Challenger, Head of Collections & Customer Experience at Billing Finance.
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