Post by WestonKevTMP on May 31, 2018 9:53:28 GMT
Comrades,
I thought I'd provide an update on regulatory risk, which is always a concern for higher APR platforms no matter how ethical or transparent. This is important for platform stability, which in turn is good for lenders (i.e. borrower default risk is usually most lenders primary concern, but it's actually platform failure that has caused total wipe-outs....).
Today the FCA publishes a report on the outcome of their high-cost credit review ( www.fca.org.uk/news/press-releases/fca-publishes-outcome-high-cost-credit-review ). The result is very positive for The Money Platform, although it’s worth going back in history. Early this decade players like Wonga were treating customers poorly, notably with very high interest rates and rolling over debt. This resulted in the FCA’s investigation in 2015 ( www.fca.org.uk/firms/price-cap-high-cost-short-term-credit ) that resulted in these key changes;
• Cost cap of 0.8% per day (including fees),
• £15 cap on default fees, and
• Cost cap of 100% (the mathematics of this meant that HCSTC lenders couldn’t just keep rolling debt over and racking up APR that resulted in rates over 5,000% APR)
The impact of this cap was investigated by the FCA in 2017 ( FCA report: www.fca.org.uk/publication/feedback/fs17-02.pdf , and research paper www.fca.org.uk/publication/research/price-cap-research.pdf ). This report was very positive on the impact of the 2015 changes on HCSTC, stating “maintain the price cap on HCSTC at its current level. That decision is based on the results of our analysis which we present in this paper which indicate the cap and other regulatory measures have been a success”
What was interesting about the 2017 findings was that they were going to switch their focus to overdrafts – “We have different concerns about both arranged and unarranged overdrafts. We have concerns about consumers’ long-term use of arranged overdrafts, at levels which are persistent, unsustainable, or both. Our concerns about unarranged overdrafts are also broader. Their use is often inadvertent, and charges appear high and complex.”
Today’s report ( www.fca.org.uk/news/press-releases/fca-publishes-outcome-high-cost-credit-review ) reaffirms the 2017 findings. And the focus of this report continues to be overdrafts, but also rent-to-own, Home-collected credit and catalogue credit.
As a result it is very good news for The Money Platform, in that it provides regulatory certainty for some time to come. With no changes proposed that impact our business.
Kevin.
I thought I'd provide an update on regulatory risk, which is always a concern for higher APR platforms no matter how ethical or transparent. This is important for platform stability, which in turn is good for lenders (i.e. borrower default risk is usually most lenders primary concern, but it's actually platform failure that has caused total wipe-outs....).
Today the FCA publishes a report on the outcome of their high-cost credit review ( www.fca.org.uk/news/press-releases/fca-publishes-outcome-high-cost-credit-review ). The result is very positive for The Money Platform, although it’s worth going back in history. Early this decade players like Wonga were treating customers poorly, notably with very high interest rates and rolling over debt. This resulted in the FCA’s investigation in 2015 ( www.fca.org.uk/firms/price-cap-high-cost-short-term-credit ) that resulted in these key changes;
• Cost cap of 0.8% per day (including fees),
• £15 cap on default fees, and
• Cost cap of 100% (the mathematics of this meant that HCSTC lenders couldn’t just keep rolling debt over and racking up APR that resulted in rates over 5,000% APR)
The impact of this cap was investigated by the FCA in 2017 ( FCA report: www.fca.org.uk/publication/feedback/fs17-02.pdf , and research paper www.fca.org.uk/publication/research/price-cap-research.pdf ). This report was very positive on the impact of the 2015 changes on HCSTC, stating “maintain the price cap on HCSTC at its current level. That decision is based on the results of our analysis which we present in this paper which indicate the cap and other regulatory measures have been a success”
What was interesting about the 2017 findings was that they were going to switch their focus to overdrafts – “We have different concerns about both arranged and unarranged overdrafts. We have concerns about consumers’ long-term use of arranged overdrafts, at levels which are persistent, unsustainable, or both. Our concerns about unarranged overdrafts are also broader. Their use is often inadvertent, and charges appear high and complex.”
Today’s report ( www.fca.org.uk/news/press-releases/fca-publishes-outcome-high-cost-credit-review ) reaffirms the 2017 findings. And the focus of this report continues to be overdrafts, but also rent-to-own, Home-collected credit and catalogue credit.
As a result it is very good news for The Money Platform, in that it provides regulatory certainty for some time to come. With no changes proposed that impact our business.
Kevin.