New Markets - New Opportunities?

1. NewMarkets -NewOpportunities?

2. The Lending Standards Board • Money Advice Scotland Conference • June 2011

3. The Lending Code • The Lending Code was introduced in November 2009 following • transfer of responsibility for regulating current accounts in credit • and savings products to the FSA. • The Lending Code covers • Overdrafts • Unsecured loans • Credit and charge cards • It offers protection to • Consumers • Micro enterprises • Charities • The Lending Code is owned by the sponsors (BBA, BSA and UK • Cards) and is independently monitored and enforced by the • Lending Standards Board

4. What the Code says – Key Commitments • Under the Code, firms agree to a number of key commitments • Advertising to be fair, clear and not misleading • Customers to be given clear information about how their account works • Customers will receive regular statements and be told if interest and charges change • Firms will lend responsibly • Deal quickly and sympathetically when things go wrong and help when customers are in financial difficulties • Personal information will be regarded as confidential • Staff will be trained to implement the Code

5. What we seek to achieve and how you can help • We are seeking • Good compliance with the Code • Positive engagement with all stakeholders • Change by persuasion where possible • Spread good practice and highlight bad • Develop the Code where it is weak or silent • What we need from you • To work with creditors on behalf of your clients, constructively, positively and openly • To make sure that lenders know when you have problems and to register complaints formally • To let us know when things aren’t working or when the Lending Code is not being applied

6. Review of the Lending Code • Consultation responses • 33 Submissions received • All significant stakeholders represented • Independent reviewer outcomes • 43 main recommendations • 21 related to financial difficulties • Response from Code sponsors • 30 recommendations accepted in full • 7 compromises agreed • 6 rejected • 19 less material changes – majority accepted

7. Views on review outcomes • LSB View – good process and successful outcome against complex • backdrop • Key improvements • Financial difficulties • Early identification and engagement • Treatment of self-help customers • Mental Health • New consumer guides • Other stakeholders • Whilst not all suggestions were adopted, overall view is positive • Good level of support for the Code

8. Key Changes to the Code • Better customer information • Broader Credit assessment criteria • Defined responsibilities for credit card providers • More help for customers in financial difficulties

9. Key changes to the Code – Financial Difficulties • Pro-activity – Identifying and contacting customers who may be at risk of • financial difficulties. • Early engagement – consideration of plans prior to default. • Customers should not be expected to increase their repayments at • review unless their circumstances have improved. • Breathing space provisions extended to ‘self-help’ customers. • Operation of account during breathing space. • Further 30 days to be agreed if progress being made towards a • repayment plan. • LSB standards on use of right of set off and approach to interest and • charges. • ‘Token offers’ should be accepted. • Common Financial Statement expenditure challenged only when • additional information available.

10. Key changes to the Code – Financial Difficulties • CFS creditor checklist usage subject to LSB monitoring and • enforcement • CFS obligations to be extended to other similar statements as • agreed by the LSB and sponsors • CASHflow statement to be considered in same way as statement • submitted by advice agency • Customers to be advised before debt is transferred or sold • Enforcement methods must be relevant to jurisdiction of debtor • Debt & Mental Health • Subscribers encouraged to establish specialist teams • Oral notification should be sufficient to suspend calls and letters • Customers to be informed how information about their condition will be used • Subscribers expected to consider DMHEF if presented

11. Robust monitoring and enforcement • No change to monitoring ‘mix’ • Heavy reliance on themed reviews • Investigations • Annual Statement of Compliance (ASC) • LSB action will be proportionate • Focus is on compliance • Intelligence gathering • Senior management and business line engagement • Stakeholder desire for increased transparency needs to be balanced • against subscriber confidentiality

12. Monitoring Agenda 2011/2012 • Financial Difficulties • Currently being undertaken • 9 Subscribers • Credit Assessment • 8 Subscribers • Review of enhanced Code requirements • Opt out of unarranged overdrafts • Commitment to OFT • Credit Cards • UK Cards best practice guidelines • Code enhancements • Annual Statement of Compliance (ASC) • Evidence Check

13. Forward Agenda 2011/2012 • Debt Sale • Compliance Monitoring & Risk Strategy • Transitional, waivers and interpretation requests • Watch list • Impact on customers of immediate reduction or withdrawal of credit lines • Treatment of customers during the ‘breathing space’ • Clarity of communications issued to customers especially as part of the collections process • Use of unfair/inappropriate collections techniques • Impact of increased credit card minimum repayments

14. What does the future hold? • Future looks likely to be FCA • Target should be at least as strong as the sum of current regulatory regimes both statutory and self-regulation • Self-regulation has a number of advantages over statutory regulation • LSB concern to ensure no reduction in consumer protection • Lending Code will continue until it is clear we are no longer needed

15. Questions?

16. The Lending Standards Board • Money Advice Scotland Conference • June 2011