‘FCA is not fit for purpose’: Motor finance lender bosses lash out
Motor finance lender executives criticised the Financial Conduct Authority (FCA)’s performance in the sector, telling members of the Lords that the regulator is “not fit for purpose”.
Stephen Haddrill, director general of the Finance and Leasing Association (FLA) and Anthony Coombs, chair of S&U, were witnesses at a House of Lords’ Financial Services Regulation Committee today where they hit out at the body.
“We feel the regulatory regime at the moment is not conducive to lending in a number of respects, and that is damaging to investment,” stated Haddrill.
He noted that “the lack of certainty is exemplified” in recent weeks as he pointed out a landmark court ruling highlighted “the inconsistency between the law and regulation.”
Last month, the Court of Appeal handed down a landmark ruling after it sided with the consumers. The court ruled that the lenders did not receive consent from customers about the amount of commission they charged.
Coombs, who attended in a personal capacity, suggested that from a motor finance view, “the FCA is not fit for purpose”.
He warned that the regulator was “smothering” this section of the financial services market, and stresses “as a result, it is reducing access to credit for about 17-20 million people, without any great consumer benefit”.
What the Chancellor described as the crown jewel of the British economy in terms of the financial services sector, is being very badly damaged by regulation at the moment
He quoted the FCA chief executive Nikhil Rathi who said at “the FCA, we want to play our part in supporting a thriving, attractive, competitive financial sector in the UK”.
Coombs informed Lords that he “wonders if Mr Rathi is inhabited in the same universe as we are, as it is certainly not the same we deal with on a daily basis.”
He warned his view of the FCA is its micromanages and is inconsistent, stressing that the regulator has created a claims culture.
FCA is “deterring investment”
Haddrill explained that claim management companies have emerged in the UK “to exploit” the differences between regulation and the law.
He noted to the Lords that 50 per cent of the litigation funding in Europe is flowing into the UK. “It is because of some of the problems in our regulatory and legal system, we are a magnet for this,” he added.
The men informed the members that the FCA are “deterring investment” in this sector.
To which Haddrill said reform is needed, his examples, the Consumer Credit Act, the relationship between the Ombudsman and the FCA, and a “sensible” statue of limitation.
He also added that the Court of Appeal judgment needs to be looked at by the Supreme Court.
The Court of Appeal denied the lenders permission to appeal to the highest court in the UK, but it is understood that the lenders have applied directly with the Supreme Court this week. A decision on if the court will hear the appeal is pending, the FCA has written to the justices asking it to “decide quickly”.
“If those things go in the right directions, we will see more funding come into the market, and see something rather bad, reversed,” Haddrill added.
Commenting on the stataments, a FCA spokesperson said: “We are aware of the impact that the Court of Appeal judgment has had on firms and the market in general, we agree that the Supreme Court should consider this issue quickly.”
On the wider issue of redress, we already have work underway, in cooperation with the Government and FOS, to modernise the redress system to ensure it both protects consumers but also provides greater stability for firms,” they added.