1. Improving consumer outcomes in the credit markets The role of industry codes 11 March 2015 Robert Skinner

2. We are not short of industry codes! BBA/BSA/UK Cards AssociationLending Code Finance & Leasing Association (FLA)Lending Code British Cheque and Credit Association (BCCA)Code of practice Consumer Credit Association (CCA)Code of practice Consumer Credit Trade Association (CCTA)Code of practice Consumer Finance Association (CFA)Code of practice National Association of Pawnbrokers (NPA)Code of conduct Credit Services Association (CSA)Code of practice Debt Managers Standards Association (DEMSA)Code of conduct Debt Resolution Forum (DRF)Code of practice Peer-to-Peer Finance Association (P2PFA)Operating Principles

3. What has been said about codes? (March 2013 consultations) FSA –We encourage trade associations to continue their work on codes, and are keen to establish relationships with code owners to help us understand the key issues for particular industries when dealing with their customers –We will have dedicated supervisory resource for monitoring firms’ compliance with our own regime and so are unlikely to place reliance on third parties to monitor firms’ behaviour HMT & BIS –Industry codes can play a valuable role in the regulation of the consumer credit market –The Government is also keen to explore further the ways in which voluntary codes can complement rules-based regulation under the FCA Feedback mixed but FCA and Government confirm they believe codes can play a useful role

4. Adding value Industry codes of practice can –Allow those providers who wish to differentiate themselves set higher standards than statutory rules –Set standards in areas that are not covered by and may not be appropriate for the statutory regime –Record and monitor voluntary agreements entered into by industry –Link regulatory requirements with good market practice –Address changes in the market and emerging concerns reducing or delaying the need for statutory rules –Assist FOS in making determinations on good industry practice Codes should not just replicate statutory requirements Codes can assist in achieving a consumer credit regime that has an appropriate balance between consumer protection and the needs of a properly functioning competitive market

5. Key features of successful self-regulation Lending Code Strong independent governanceY Robust standardsY Effective monitoring and reportingY Meaningful and proportionate sanctionsY TransparencyY High market coverageY External consultationY Good working relationship with statutory regulatorY

6. The Lending Code Going beyond the statutory rules –Sale of debt –Financial difficulties –Lending to small businesses Industry best practice –UK Cards Association best practice guidelines Codifying voluntary agreements –‘Opt-out’ from unarranged overdrafts –Lending to armed forces personnel Flexible and responsive –‘Right of set-off’ Tailored to market and products

7. LSB reviews Recently completed –Financial difficulties (incl oversight of outsourced collections) –Cost of calling help and information lines –Vulnerable customers –Pre-arrears –Annual statement of compliance (ASC) In course/planned –Credit card information provision (mystery shopping) –Oversight of outsourced activities/services –Lending to small businesses –Credit assessment –Further financial difficulties work

8. What are the risks to the future of codes? Lack of added value –For firms –For consumers Low visibility Failure to ensure and demonstrate compliance Lack of market coverage Proliferation of codes –Confusion Lack of recognition by statutory regulators and policy makers Failure to adapt

9. Development of the Lending Code November 2009 : Lending Code introduced. Broadly contained the previous Banking Code lending provisions, but included a number of enhancements –Breathing space for credit card customers –Support for customers in debt with mental health problems 2010 additions –Extension of breathing space provisions to all products –New Statement of Principles for small business lending March 2011 : revised Code issued following independent review –Over 43 major recommendations made including 21 in area of financial difficulties May 2012 : New rules introduced covering outsourcing of debt collection and the sale of debt August 2014 : Code subscription open to debt collection and debt purchase firms

10. Independent review of the Lending Code 2014 NovemberProfessor Griggs appointed to undertake Code Review DecemberInvitations issued to interested parties and public call for submissions 2015 JanuaryEvidence gathering toand Marchconsultation MayPreliminary conclusions to LSB Board JulyFinal report to LSB Board SummerNegotiations with Sponsors on main rule changes in Code AutumnNew Code launched

11. The Lending Code review A need for change Keen to hear views on –Existing provisions that, with the benefit of experience, need to be revised or updated to ensure their intended outcome is achieved –The identification of areas of potential detriment not presently addressed adequately by the Code or statutory rules –Changes required as a result of market developments such as new delivery channels –Changes that could improve the effectiveness and understanding of the Code and the work of the LSB –How the wider benefits of the Code and the LSB regime can be increased

12. The Future There is a place for both statutory and self-regulation The best outcome would be for them to continue to co-exist An opportunity to build upon what exists today The future of codes is in the hands of the industry

13. Improving consumer outcomes in the credit markets The role of industry codes 11 March 2015 Robert Skinner