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The lending code session rs


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  • 1. The Lending Code Ensuring continued Effectiveness
    Robert Skinner
    Chief Executive
    Lending Standards Board
    17 May 2011
    IMA – assuring quality in the money advice profession
  • 2. Outline
    Outcome of the review of the Lending Code
    New provisions
    Working with stakeholders
    Monitoring and enforcement
    Increasing awareness of the Code
    The future of consumer credit regulation
  • 3. The Lending Standards Board
    Functions to:
    monitor compliance with the Code and take enforcement action for material breaches
    assist subscribing firms interpret and meet the letter and the spirit of the Lending Code
    identify gaps and deficiencies in the Code that could lead to customer detriment and to advocate change
    oversee the Code review process – but final decision on content remains with the Sponsors
    maintain a public list of Code subscribers
  • 4. History
    Lending Code broadly contained the previous Banking Code lending provisions, but included a number of enhancements
    risk adjusted re-pricing for credit cards
    breathing space for credit card customers
    support for customers in debt with mental health problems
    2010 additions
    extension of breathing space provisions to all products
    new Statement of Principles for small business lending
    2011 additions
    new credit card rules
    Guidance issued in 2010
    interest and charges concessions
    use of the right of set-off
  • 5. Review of the Lending Code
    Reviewer’s report and industry response published 28 February
    New Code launched 31 March
    Consultation responses
    33 submissions received
    LSB and Code sponsors
    Government departments incl HMT/BIS
    Regulators incl OFT
    Debt advice and consumer bodies
    Others including Code subscribers, FOS, CRA’s, Royal College Psychiatrists
  • 6. Outcome of the review
    43 main recommendations
    21 related to financial difficulties
    Response from Code Sponsors
    30 recommendations accepted in full
    7 compromises agreed
    6 rejected
    19 less material changes recommended, the majority of which were accepted
  • 7. New provisions
    Promotion of the availability of quotation searches
    Strengthened credit assessment requirements
    Clear explanation if a credit application is declined
    Standards covering the promotion and operation of an ‘opt-out’ from unarranged overdrafts
    Pre-notification of overdraft interest and charges
    Prohibition on mailing of unsolicited credit card cheques
    Awareness of credit card charge back provisions
    Express consent to be obtained before a customer refused credit is referred to another lender
  • 8. New provisions: Financial difficulties
    Pro-activity – identifying and contacting customers who may be at risk of financial difficulties
    Early engagement – consideration of plans prior to default
    Customers should not be expected to increase their repayment at review unless their situation has improved
    Repayments on a consolidation loan should generally be no more than sum of existing payments
    Breathing space provisions to be available to ‘self-help’ customers
    Operation of account during breathing space
    Further 30 days breathing space to be agreed if progress is being made towards a repayment plan
    Communications should be via customer’s adviser
  • 9. New provisions: Financial difficulties (cont’d)
    LSB standards on use of right of set-off and approach to interest and charges concessions
    ‘Token offers’ should be accepted
    CFS expenditure figures should only be challenged when additional information available
    CFS creditor checklist to be subject to LSB monitoring and enforcement
    Obligations on subscribers re CFS to extend to other similar statements agreed by the LSB and Sponsors
    CASHflow statement to be considered in same way as a statement submitted by advice agency
  • 10. New provisions: Financial difficulties (cont’d)
    Customers to be advised before debt is sold
    Enforcement methods must be relevant to jurisdiction of the customer
    A number of new provisions covering debt and mental health including:
    Subscribers encouraged to establish specialist teams
    Oral notification should be sufficient to suspend calls and letters
    Customers to be informed how information about their condition will be used
    Subscribers expected to consider DMHEF if presented
  • 11. Outside scope of review
    Commercial issues
    Pricing and level of charges
    Risk appetite
    Products and customers covered by the Lending Code
    Monitoring and enforcement of Code
  • 12. What do you think of the outcome?
    IMA – assuring quality in the money advice profession
  • 13. So where now - ensuring continued effectiveness
    Industry commitment
    Stakeholder relations
    Robust monitoring and enforcement
    Achieving increased awareness of Code (and LSB)
  • 14. Industry commitment
    Response to Code review recommendations has been very positive as has willingness to agree new guidance ahead of full review
    Uncertainty about the future of consumer credit regulation must not lead to reduced support for current regime
    Being seen to be responsive when potential detriment is identified
    Minimum standards v best practice
  • 15. Working with other stakeholders: approach, expectations and concerns
    Other regulators
    Consumer and debt advice bodies
    Industry commentators
  • 16. What can the LSB do better?
    IMA – assuring quality in the money advice profession
  • 17. Robust monitoring and enforcement
    No change to monitoring ‘mix’
    Heavy reliance on themed reviews
    Annual statement of compliance (ASC)
    LSB action will be proportionate
    Focus is on compliance
    Intelligence gathering
    Stakeholder desire for increased transparency needs to be balanced against subscriber confidentiality
  • 18. Priorities for 2011
    Outstanding Code review issues
    Debt sale
    Mental health/mental capacity
    Ensuring new Code requirements are embedded in policies and practices
    Continued focus on credit assessment and financial difficulties
    Review of complaints data
  • 19. Forward agenda 2011
    Reviews planned
    Financial difficulties (in course)
    Credit assessment Q3
    Unarranged overdrafts Q3
    Credit cards Q4
    Watch list
    Impact on customers of immediate reduction or withdrawal of credit lines
    Treatment of customers during the ‘breathing space’
    Clarity of communications issued to customers especially as part of the collections process
    Use of unfair/inappropriate collections techniques
    Impact of increased credit card minimum repayments
  • 20. Awareness of the Code
    Consumer guides
    Available in branch and on-line now
    To be provided to new customers from July 1
    LSB Bulletin and website
    Subscriber/Sponsor promotion
    Engagement with consumer and advice bodies
  • 21. What does the future hold?
    HMT/BIS response to recent consultation on consumer credit regulation not due until end July but ….
    Future appears likely to be the FCA
    Is there a role for self-regulatory codes in an FCA world?
    LSB position
    For now and for some time to come, self-regulation via Lending Code will continue - enforced by the LSB which we believe has the support of key stakeholders
    Transition to ‘target regime’ to be handled carefully
    LSB concern to ensure no reduction in consumer protection during changes
    Importance of current Lending Code review
  • 22. The Lending CodeEnsuring continued effectiveness
    Robert Skinner
    Chief Executive
    Lending Standards Board
    17 May 2011
    IMA – assuring quality in the money advice profession