SDRP consultation update – possible webinar before consultation deadline – statement of interest
I have circulated the slides and questions from the HM Treasury open forum event on 21 June 2022 and we now have a ‘by invitation’ event on 5 July 2022 with a follow-up on 12 July 2022. There is then a ‘deep dive’ event later in July (between 19-21 July). I have circulated some of the HM Treasury questions for debt management firms to refresh their impact assessment. It is important that debt management firms represent their views and MI to ensure this overall picture is as accurate as possible. This will influence whether SDRPs are a niche product or a mainstream debt remedy.
I will be attending the next IPA SERL working group on SDRPs and attending the Arum/Just webinars on 11th and 12th July.
There seems little doubt that the SDRP regulations will be going ahead, so we need to ensure that they are as workable as possible and fit-for-purpose. It is evident that there are many aspects to resolve and credit reporting is one of these. The danger with too many ‘behind closed doors’ discussions is that the creditors and debt advice providers that have to actually implement the debt remedy find out the systems & controls changes too late. I have previously expressed concerns around the lack of transparency in BNPL reporting, especially if you are trying to explain this to a consumer. Many of the ‘your credit file explained’ documents have been withdrawn from public access and they generally don’t reflect what a credit profile looks like when things go wrong (i.e. accumulation of arrears into default).
I will provide another update at the end of next week. Anthony Sharp has invited me to speak at the Enforcement Law Review Group on 18 July at the House of Lords. I will be covering the Debt Respite Scheme and SDRPs. I am refreshing the deck that I produced for the Credit Strategy event in November 2021 and have requested input from debt advice providers with experience of Breathing Space. StepChange and PayPlan were very helpful last time around and I would like to build on the update from Peter Tutton from the anniversary in May 2022.
There appears to be some interest in holding a short webinar before the consultation deadline of 5 August. If this is of interest then please drop me an email and I will canvas when it is best to hold this event taking account of the events above.
Dear IP – Issue 147 – June 2022
This is an important issue and one that is relevant to the SDRP consultation.
Further to the DEMSA bulletin on the ASA/CAP Notice, Issue 147 of ‘Dear IP’ warns Insolvency Practitioners to be aware that a market-wide enforcement action has been launched by the UK Committee of Advertising Practice (CAP) and the Advertising Standards Authority (ASA) in relation to advertising and marketing of services for Individual Voluntary Arrangements (IVAs) and/or Protected Trust Deeds (PTDs).
Insolvency Practitioners are reminded of their obligations in respect of both their own and third-party advertising, marketing and other forms of promotional activity as outlined in Dear IP 108 (https://www.gov.uk/guidance/dear-insolvency-practitioner/13-general).
Guidance has also been published on 26 June 2022 to support the IVA protocol for existing protocol compliant IVAs. The IVA Standing Committee recognises that the current pressure on individual finances may have an impact on a consumer’s ability to be able to make monthly contributions into their IVA arrangement at the same level as previously agreed. The purpose of the approach set out in this guidance is to support the IVA Protocol in keeping as many consumers as possible in their arrangements and paying a contribution to their creditors, in order that they can maintain and complete their IVA. This needs to be reflected in the SDRP discussions where lack of flexibility is a critical success factor.
It has been agreed that reductions will generally be accepted by creditors of up to 50% of current contributions, or £75, whichever is higher. The section is worth reading for many on the circulation around changes in circumstances and the evidence required from the consumer.
MaPS June 2022 Newsletter
The June newsletter includes several topics, including a linking around consumers talking to their creditors if they are struggling with bills.
The MaPS latest blog highlighting research from their Debt Need Survey shows that 38% who had used BNPL products in the last 6 months are in need of full debt advice. MaPS Debt Insight Manager, Paul Das, shares knowledge about people using BNPL products and the MaPS concerns about what is currently offered by some providers and discusses how this product could fit within the regulated credit landscape. DEMSA has recently covered the proposed timetable for bringing BNPL under FCA regulation, which seems quite protracted unless the majority of the sector comply voluntarily.
There is some useful insight that will develop as more open banking and credit reference data is shared. MaPS has supported wider data sharing in its recommendations. It is clear that BNPL has attracted people with a range of different household incomes with a slight skew towards households with an income of under £20,000 per annum. However, BNPL definitely isn’t focused on low-income households. Users of BNPL highlight differences in financial resilience from the UK population as a whole.
Some MaPS areas of concern will overlap with the ongoing Credit Information Market Study:
- The light credit and affordability checks need to be strengthened in line with the FCA proposals and current ‘Dear CEO’ communications around proportionate affordability and vulnerability checks. This links with the MaPS credit score invisibility bullet
- Lack of understanding of the product. Financial education in a low friction environment is important
- Using BNPL for food and essentials. I suspect there is a widespread view that using BNPL to pay for some essential items is a potential indicator of significant financial stress
On a topic linked to the MaPS update, I have joined in a discussion by Arjun Mitra of Firstsource regarding BNPL in the US and the need for consistency around credit reporting of BNPL, which I support in the UK. If anyone is interested, I have just updated my credit report training to reflect some of the inconsistencies in reporting between the CRAs and the impact of open banking and BNPL. I also look at the sharing of property rental data. Whilst the 3 major CRAs are common (i.e. Equifax, Experian and TransUnion) between the US and the UK, there are many differences in terms of the products and the wider ecosystem in terms of credit brokers (e.g. Credit Karma, ClearScore and TotallyMoney) and data content. Many service providers are now needing to integrate CRA data for affordability assessments and wider ‘search’ reasons. Understanding the various search types and whether they leave a hard or soft footprint is important. Where undertaking searches on behalf of a consumer (e.g. in a consumer portal) has different implications and compliance requirements. White labelling of services is now more commonplace and the implications of having data processors involved is important as the regulators look at key suppliers in supply chains (e.g. cloud providers).
Klarna is now sharing data. Purchases in UK from June 2022 using Klarna ‘Pay in 30’, ‘Pay in 3’, in-app shopping (OTC) and Klarna Card will become visible on consumers’ credit files. They share purchases settled on time, late payments and unpaid purchases.
This comes as Klarna’s valuation dropped from $46 billion to $6.5 billion in a new funding round. There has also been coverage of the global bad debt rates in BNPL relative to mature sectors like credit card lending.
TransUnion has published its newsletter and this includes stories around lending in a time of crisis, Lloyds Bank offering customers access to their credit files and the rise in popularity of BNPL. I have found accessing some of the CRA sites in the US useful in terms of getting more insight into demographics and how BNPL will appear on credit files, especially in terms of more regular updates. When high-cost short-term credit (HCSTC) was at its peak with players like Wonga, the TransUnion UK ‘your credit file explained’ guide discussed MODA, where members of the closed user group updated information daily. In the US, Equifax has acquired Teletrack, who entered the UK market to share high velocity data like HCSTC transactions. It will be interesting to see how thinking evolves on this topic with the FCA Credit Information Market Study and some of the other data sharing initiatives around new products like BNPL.
Congratulations to Amon, Paul and the Ophelos team on raising £5m in seed funding led by AlbionVC. They continue their quest along with several others in the digital debt resolution arena.
2022 Credit Awards winners
The Credit Awards last week seemed to be very well attended and with a number of winners on the circulation list. I covered the appointment of Mark Thundercliffe as new Chairman at IE Hub and he won a lifetime achievement awards, whilst IE Hub won 2 awards. Great to see Mark Onyett win the outstanding contribution to the industry award. I remember working with the fledgling TDX Group in the Hammersmith offices where Firstsource were also based. Congratulations to the Digital DRA, I spotted a few of the posts as the day progressed. C & R Software won the business continuity award. Lantern sponsored the debt advice provider of the year, which went to StepChange. Vulnerable customer strategy went to South East Water.
Registry Trust – June 2022 stakeholder update
Another aspect of my updated credit reporting training is around public record data. The RTL register of partial settlements could be an important development in this area. RTL is developing a register of partial settlements where this information can be stored and shared with the CRAs, law firms, debt management companies, lenders, insurance companies, enforcement and collections agencies, government bodies, charities, regulators, think tanks and members of the public (via www.trustonline.org.uk). This is intended to transform CCJs from a binary factor in credit decisions to an enriched source of data which includes verified payments and partial settlements.
I have registered for this event.
The fifth Online Collections Technology Think Tank will feature a number of discussions to understand the best possible collection strategies in 2022. Chris Warburton is chairing.
Sebrina McCullough of FWG is discussing Customer Engagement. Craig Hinchcliffe from Perch, Sheraz Afzal from Quint and Andrew Alder from Paylink Solutions are discussing Assessing Collections Risk. Nina White from Thames Water and Peter Munro from PayPlan are discussing Propensity to Pay. Dale Williams of Telrock is discussing the Future of Collections Technology.
I picked the Open Banking Expo up from the TransUnion newsletter.
I have registered for this webinar being run by Natasha Bambridge of BSI. I have been working with Natasha, Chris Parry, Jo Howcroft and Kiren Kaur to encourage early adopters in the Financial Services, Energy and Water sectors. This extends to specialist vulnerability support providers and many on the circulation have already had initial discussions with one of the team at BSI.
It is a free webinar focusing on the BSI Kitemark for Financial Services and the benefits it can bring to your firm.
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