Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
This Invisible Tech Stock Threatens Amazon with 800,000+ Online Stores - 21st Nov 19
Crude Oil Price Begins To Move Lower - 21st Nov 19
Cracks Spread in the Precious Metals Bullion Banks’ Price Management System - 21st Nov 19
Why Record-High Stock Prices Mean You Should Buy More - 20th Nov 19
This Invisible Company Powers Almost the Entire Finance Industry - 20th Nov 19
Zig-Zagging Gold Is Not Necessarily Bearish Gold - 20th Nov 19
Legal Status of Cannabis Seeds in the UK - 20th Nov 19
The Next Gold Rush Could Be About To Happen Here - 20th Nov 19
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

What Does the Future Hold for the High-Interest Credit Market?

Companies / Debt & Loans Apr 12, 2019 - 09:38 AM GMT

By: Submissions

Companies The consumer credit sector has changed a lot, and the Financial Conduct Authority (FCA) says that they are focused on affordability of loans. They say their commitment to affordable credit and sustainable business models won’t change. Behind this sentiment there is the idea that a purposeful culture is the best way to deliver value to borrowers, success for firms, and less pressure on their employees.

It is important, according to a watchdog of the UK’s markets, to curb risky lending operations. In recent months, lawmakers have been increasing the pressure on the FCA to protect the most vulnerable people from predatory lending and risky relending practices. Its job, after all, is to protect consumers from excessively high interest rates. So now that legislators are pressuring the FCA to regulate and hold lenders accountable, how will this market change in the future?



Business Models

The FCA will focus on creating business models that are sustainable and fair to customers. Their price capping initiative on rent-to-own companies was introduced on the first of April and will, according to the agency, save consumers up to £22.7 million a year.

They will also launch an investigation into motor finance companies, which have raised concerns about the way lenders are choosing to reward automotive retailers and other credit brokers. Changing this business model is a key component of their initiative.

Culture of Firms

Another point of interest for ensuring that these high-interest credit are made more affordable is the culture of these firms. The relentless outlook of profit hinders affordable loans. For example, the lack affordability was a key component of the collapse of Wonga.

The debt management sector is also identified as an area where the affordability of loans and the culture of the company are related. Not only is managing credit loans in the best interest of the consumer, companies that do the best go beyond the compliance culture. These businesses are focused on customer outcomes, not maximizing profit at all costs.

According to the experts at MoneyPug, a website used to compare the best payday loans, some of these firms offer the most reasonable payday credit options. While payday loan companies are rarely the ones we commend for reasonable interest rates, if you bother to look for firms with the most reasonable loans you will typically find the most sustainable company culture.

Focusing on Affordability

With the consumer credit sector taking up the largest portion of firms the FCA supervises, they are continuing to grow. The focus of the regulator’s new push is to ensure that credit options are affordable for the average citizen. Last year the FCA published their Approach to Supervision, which highlighted the ways in which the agency aims to supervise credit firms. This includes a pre-emptive approach when engaging with credit companies of varying sizes.

It is a collaborative process in the way that the regulators work with the firms of similar sizes to create a strategy to make loans more affordable. The theory is that this will make credit more accessible to the average consumer, but some people don’t like the idea of the government and lenders working so closely together.

Relending

While the majority of consumers who pursue high interest credit are those who have poor credit histories and low financial resistance, the FCA says focusing on making them less expensive for consumers is the most important thing. But getting these people out of the relending cycle is another topic of interest for the regulators. New work will be done to reveal the amount of people taking out additional loans as well as understanding their motivation for doing so.

Making sure that credit loans are reasonable is a key factor to avoid the relending process. Implementing the necessary legislation to ensure that firms cannot charge above certain amounts for a designated amount of time will be one of the many steps regulators suggest to lawmakers in the future.

Furthermore it is pivotal that borrowers understand what they are getting into. Guarantors need enough information to fully see the implications of high credit loans. To make the high interest credit market a success in the long run, it is necessary for these firms to offer loan options and for the consumers to be fully educated about their rates as well as the need to escape the cycle of debt and relending.

By Juan Vittori

© 2019 Copyright  Juan Vittori - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules