Over the past two years, the FLA’s Future of Credit Project has asked pertinent questions about consumer credit and its role within the UK economy. Our initial Future of Credit report was published in February 2023, and looked at how we can build a greater relationship of trust between borrowers and lenders. Subsequent discussions boil down to a basic question: has access to credit become too hard for too many, and what can we do about it?
Improving access to credit
To help answer this question, we brought together delegates from Government, regulators, ombudsmen, industry, consumer groups and fintechs in two Symposia.
The first, held in October 2023, identified four critical priorities for improving access to credit: regulatory certainty, customer understanding and behaviour, good governance around data collection, and opportunities for collaboration.
As a result, we developed Responsible Lending Priorities and commissioned research from Thinks Insight & Strategy on how we can better support customers who have been declined credit. The initial version of the FLA’s Borrower Support Guide was developed from the research recommendations and will form part of our work in 2025.
Future work
Our second Symposium was held in Westminster on 15 October 2024.
What emerged was a real sense of momentum. Delegates wanted to work collaboratively to help shape an effective and sustainable National Financial Inclusion Strategy. There was an emphasis on better coordinating financial inclusion and access to credit initiatives.
We have several asks of the Government and regulators.
First, we want to be closely involved in the development of the National Financial Inclusion Strategy. The Strategy must be built on member expertise, practical and with workable solutions that deliver. With their focus on consumer, motor and business lending, FLA members are an integral part of the UK economy and critical to growth.
The Strategy must also address the key issues identified at the Symposia: ensuring greater regulatory certainty, improving consumer awareness of affordability, credit scoring and APRs; and promoting opportunities for commercial and social lenders to work together. These challenges are well understood. We now need practical solutions.
Second, the Financial Conduct Authority must set out its vision on the non-prime consumer credit market and its role in supporting financial inclusion. The FCA and Financial Ombudsman Service must also focus on restoring market confidence so that firms can operate and innovate in these markets.
Third, new data sources and Open Banking are being used to form a detailed picture of a customer’s ability to repay. The FLA will convene a debate on delivering greater alignment on minimum data requirements and how this data is interpreted.
Finally, the FLA will undertake further work on effective support for customers who have been declined for credit, to assist understanding and improve future opportunities. This will include further updates to the Borrowing Support Guide.
The FLA wants to work collaboratively with a broad range of stakeholders on improving financial inclusion and access to credit.
Responsible Lending Priorities
Access to Credit: Next Steps 2024
Access to Credit Symposium 2024
Access to Credit Symposium 2023