The EU referendum has caused a stir around the UK and there are already changes on the horizon, especially for international fleets, but even at this early stage, the Bank of England's reaction works to the car leasing customer’s advantage in more ways than one.
The Bank of England’s buffer
The Bank of England is postponing their demand for £5.7bn of extra financing to be held on the balance sheets of eight of the major UK banks, who between them represent 90% of UK lending. This change to what’s known as the "countercyclical capital buffer" means that, given how banks leverage their lending, they can and should increase credit supply to households and businesses to the tune of an estimated £150bn.
So, more lending available. Good for banks. Good for consumers.
What’s been happening in parallel is a clamp down on sub-prime lending ruffians: Financial Conduct Authority rules are being verified and checked on a more proactive basis.
The FCA’s pursuits are unwavering and have been since it took over consumer credit regulation from the OFT (Office of Fair Trading) back in 2014:
- create rules that firms must follow (policy)
- firms’ authorisation (to become an approved broker/lender)
- ongoing supervision of regulated firms’ activities
- use enforcement powers in instances where egregious misconduct is identified
These activities will all be familiar to every consumer credit company in the UK. They are a reflection of the FCA’s strict stance on business principles which include matters such as treating customers fairly, market conduct and business integrity.
Now, in January 2015 the FCA got even more specific. They introduced a number of amendments and additions to their rules, which take customer protection and consumer credit standards even further. As well as tightening up credit brokering "transparency of status" rules – like including a firm’s full name and broker/lender status prominently in all financial promotions – the most considerable update was surrounding "transparency of fees". Any wiggle room was completely removed. So now, before any payment details are requested or any fees taken, each firm has to provide an information notice (with firm name, lending status and explicit details of the fees) to customers, then receive a signed customer confirmation in response.
In essence for the fleet leasing world it meant no consent, no car. Nothing complicated, it's just about keeping communication clear and transparent. Good practice 101.
More lending needs more regulation
It’s more important than ever with the supported increase in lending this year, for the FCA and their regulated firms to remain vigilant.
Although one of the FCA’s tasks is “ongoing supervision”, the FCA application itself only requires firms to state that they have regulated procedures in place (such as an information notice) to gain authorisation, they don’t have to demonstrate them at that stage. So, some banks and leasing providers are doing their own auditing as well, to ensure their affiliated firms’ FCA authorisations are being lived and breathed as it were, not just words.
Low and behold, some UK firms have little scruples and have not been using the processes required of them despite having FCA authorisation. The long and short of it is that those firms have been busted and so struck off.
Embarrassing for the industry, sure, but this really is very positive news for customers: the rules are being tightened, the industry is taking responsibility and the consumers are reassured.
Our advice to car leasing customers? If you don’t get an information notice about fees from your leasing provider, either demand one or take your money elsewhere. They’re either cowboys or blaggers, either way, they’re not being transparent.
The moral of the story
We are seeing two types of positive change for leasing customers: the Bank of England’s support of immediate lending opportunities and tighter regulation.
We would expect FCA rules and industry responsibility only to continue on this moral trajectory. As we venture forward into Brexit life in light of the Bank of England’s buffer postponement, we are smiling from ear to ear. Finally our industry is being hauled over the coals and only the good will out.
Covase Ltd. is authorised and regulated by the Financial Conduct Authority. For more information on the FCA rules that Covase eat, sleep and breathe, visit the FCA website.