1. New Markets - New Opportunities?

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 o Overdrafts o Unsecured loans o Credit and charge cards It offers protection to o Consumers o Micro enterprises o 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 o Early identification and engagement o Treatment of self-help customers o 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 o Subscribers encouraged to establish specialist teams o Oral notification should be sufficient to suspend calls and letters o 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’ o Heavy reliance on themed reviews o Investigations o 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 o Currently being undertaken o 9 Subscribers Credit Assessment o 8 Subscribers o Review of enhanced Code requirements Opt out of unarranged overdrafts o Commitment to OFT Credit Cards o UK Cards best practice guidelines o Code enhancements Annual Statement of Compliance (ASC) o 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