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The lending code session rs


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The lending code session rs

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