Jonathan Horsman discusses the credit industry’s growing importance among Parliamentarians and sets out what the industry can expect to see on credit and debt between now and the next scheduled Queen’s Speech in 2019.
Ask any credit business where power resides when it comes to industry rule-making and they will tell you: ‘inside the FCA’. And surveying the breadth and scale of the regulator’s rulebooks and supervisory powers, it would be hard to argue with them.
But there is one institution that holds the whip hand over the regulator, and that’s Parliament. It may have largely absolved itself from day-to-day involvement in the regulation of credit since the FCA took over responsibility from the OFT, but Parliament is still the place to air grievances if you want the FCA to listen.
In the wake of the Global Financial Crisis, the FCA has been the most politically attuned of our regulators. It keeps a hawk-like watch on parliamentary bodies like the Treasury Committee. Issues and concerns that find resonance in Parliament tend to find rapid response in the regulator. It is as perilous for the regulator to be slow off the mark when consumers are concerned as it is for Parliament.
To a lesser extent, the same holds true for the informal parliamentary groups that focus on specific industries and issues. The All Party Parliamentary Groups (to give them their formal title) do not have the same clout or profile as the Treasury or Public Accounts committees, but they are watched closely by those with responsibility for overseeing the topics they discuss.
This is certainly the experience of the APPG on Alternative Lending, which has succeeded in engaging the FCA on a number of issues since it was set up in September last year. An example is the Group’s Report on the FCA’s High Cost Credit Review, published in March.
Chaired by former personal finance writer, Julian Knight MP, the Group looks at all non-bank lending to consumers and SMEs, from instalment loans and credit cards through to the newer platforms like P2P and hybrids in between. It exists to champion the credit industry and bring balance to the parliamentary debate.
There’s a clear sense that ‘credit and debt’ are once again moving centre-stage in our national debate. The debate is cyclical, of course: politicians pay much closer when borrowing levels rise. This, combined with a softening economy and the rise of Left wing populism under Jeremy Corbyn, means we are in for a busy time during this Parliament.
So what can we expect on credit and debt between now and the next scheduled Queen’s Speech in 2019? What will be the main arguments and who will be prosecuting them?
A good starting point is the remarkable degree of consensus in the two main parties’ election manifestos. Both Conservative and Labour advocated ‘breathing space’ arrangements for struggling borrowers, while neither prescribed an extension of price controls (to the surprise of many, this columnist included).
However, this omission should provide only partial comfort to businesses in the ‘high cost’ sector. The populist appeal of caps could yet prove irresistible to an emboldened Corbynite wing of the Labour Party; and free market Conservatives would have limited power to resist if SNP and Lib Dem MPs fell in behind.
In the same vein, we can expect overdrafts and credit cards to come under attack. Former shadow Chief Secretary, Rachel Reeves MP, made a move on the former at the tail end of the last Parliament. Credit cards account for the largest proportion of consumer debt presented to the main debt charities, so they’re bound to feature on the agendas of MPs like Yvonne Fovargue, chair of the All Party Parliamentary Group on Debt, who think the regulators have done too little.
Other hot topics are student debt and friends & family borrowing. Mobilising the student vote was a key ingredient of Jeremy Corbyn’s electoral success. He did it by promising a large programme of debt write-off. In the circumstances of a hung Parliament with another election looming, we can expect Mr. Corbyn to substantiate his promise for fear of causing disillusion.
All these issues will feed into the APPG on Alternative Lending, which will be liaising with politicians of all stripes to understand their concerns. I look forward to sharing my observations with Credit Strategy’s readers: it promises to be a fascinating two years.