Interest rates – rollercoaster

Having had a complete switch off, for a week off – I am getting back in the swing of things this morning and catching up.

Obviously, the debt packager restrictions have been a headline, as have the rumbling noises of increasing interest rates and potential impact on the housing market (house prices seem to be up there with the state of the NHS and price of a pint of beer in the national psyche, so expect this to go on for a bit longer too… )

But, the following article caught my eye this morning… Interest rate caps in some US states at 36%…

A maximum interest rate cap?

In Europe there are already maximum interest rate restrictions for consumer lending in some markets… nearby examples include France at around 21.24% and Ireland at 48%.

In the UK we have generally decided to opt for a more complex set of regulations rather than a pure cap, with daily amounts, total repayments and fee limits. 

This being said, in the UK you can still find rates online commonly above 50-90% APR for sub-prime loans, above 25% for near prime and even prime credit cards at 21%.

Are changes to come?

With interest rates rising and inflation squeezing incomes you have to wonder if more changes are due here. 

This has been previously debated and would certainly change the dynamics in some areas of the credit market, impacting both general access to credit and the margins for lending businesses, many of whom are already squeezed by an increasing cost of funding…

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With media noise around lenders/lending in general increasing, could this easily be seen politically as a popular, quick, easy target and change to offset the increasing cost of living? If the case it could be something we may have to react to.

What to do now?

At the moment, I would hasten to add, this is in the realms of complete speculation and conjecture… however I do like to be prepared, and much of this is good business practice in any case.

If there were changes, it would, of course, put pressure on the collections/receivables process yet again, intensifying focus before any effects for constricted lending start to flow through.

Making sure that these processes are efficient, effective, with a demonstratable duty of care towards consumers and borrowers is important today… it would be critical should this happen…

And, as we learnt from the pandemic, getting ahead of the curve, being ready and flexible makes all the difference in how easily you can respond to handle the change.

There are of course many ways to review your processs, be it from full process/customer journey reviews to looking at resources online at lower price points… it all helps to compare vs peers and get ideas. (drop me a note if you would like some pointers for these too).

However, although the UK is a leader in many areas (especially consumer treatment), there is also an opportunity to learn from other markets.

Many of these are already managing under these restrictions already and by listening to peers elsewhere, and sharing experience, we can also get better…

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So maybe it is time to get out the travelling shoes and get out there a little more too…. something to also ponder this summer.

And what was I up to on vacation….?

Having not been on a rollercoaster for 30 years (like a fool…) I ventured to Blackpool to try the latest ones out. 

I am afraid of heights and no one will believe me when I say I was more scared on the stairs… honestly.

Anyhow the picture tells the complete story really – complete terror

… sometimes you just have to be brave and throw yourself into things…

Have a good week everyone.

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