Regulation, and particularly the coming of the Financial Conduct Authority (FCA), dominated the ninth annual Finance & Leasing Association (FLA) Motor Finance Convention at the Williams F1 Conference Centre in Oxfordshire last week.
Although Stephen Sklaroff, director general of the FLA, began by congratulating attendees on the remarkable rise in finance penetration in the past year while the wider credit market contracted, migration of regulation to the FCA and the potential imposition of the Financial Services & Markets Act (FSMA) presented the "biggest challenge in decades".
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Of particular concern to Sklaroff was the application of rules which governed a deposit-taking market, and he said the FLA would be focusing its lobbying efforts to ensure the government fully understood how this would affect the credit sector. Beyond this, Sklaroff said the March 2014 deadline for the new rules, which still required months of work, and their immediate implementation was "impossible".
Sklaroff assured delegates the FLA was raising these points both with government departments and, the previous week, at the House of Lords, asking for much of the current regulation to be kept in place.
There were two further problems, said Sklaroff: new capital adequacy requirements were yet to be resolved and the Financial Services Authority (FSA) appeared keen, despite misgivings from the industry, to have lenders and intermediaries regulate themselves through a system of appointed representatives.
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By GlobalDataResponding to those points, Kirstin Green, deputy director, Consumer & Competition Policy, at the Department for Business, Innovation & Skills (BIS), and who works with the Treasury on shaping the FCA, said the government’s aim was to encourage responsible lending and borrowing.
This would include increased freedom, empowerment and protection for consumers to choose credit, coupled with the government intention to "drive rogue companies out of the market".
Although Green recognised the "good job" performed by the Office of Fair Trading (OFT), which will handover many credit controls to the FCA, the changing pace of the market, including instant loans, required a "world-class regulatory regime" which could respond to gaps in protection while placing a "proportionate" burden on business.
Changing the CCA as it stood would entail parliamentary delays, said Green, and therefore a new body would have to be created that could respond to a shifting market. Maintaining the FSMA and CCA over companies, said Green, was "unstable" and "inconsistent".
Instead, the FCA rule-based approach would mean stronger control, scrutiny over market entrants, more oversight and a faster response. Consumer products that were unsustainable or contained misleading advertising would be banned, but new participants would not be stifled, and the government was preparing a series of roadshows to clarify industry expectations.
Under current plans, January 2013 will see consultation on secondary legislation, including with the FSA, from which the FCA will draw most responsibility. The FCA will be created in spring 2013, pending approval of the Financial Services Bill, and begin its own consultation in September.
The OFT will cease to be as of April 2014, when the FCA rulebook will be "phased in", potentially with a two-year transition period for licence holders.
Further coverage from the FLA Motor Finance convention will be published in the December issue of Motor Finance magazine.rich
