Today (2 February 2021), we are extremely pleased to see the breadth and scope of issues that the Woolard review report is encouraging the FCA to progress. We look forward to working with the FCA on next steps.
Many of these issues reflect our longstanding policy objectives. We thoroughly welcome the energetic focus on an outcome-based approach for consumers, and the notable emphasis on addressing problem debt.
While the FCA has made good progress on historic credit problems, this is still a market that risks causing harm to financially vulnerable people, and it is telling that the Covid-19 period has thrown so many of the residual issues into sharp relief.
The Woolard review is right to identify the need for a longer-term strategy and funding for the free-to-client debt advice market.
As we have highlighted for some time, it is vital to ensure that the flow of free, confidential debt advice is widely available on a sustainably funded basis – as well as to ensure that advice is solution-neutral, to avoid artificial bias in the range of solutions offered to individuals created through commercial incentives.
As the Covid-19 pandemic plays out, huge potential pent-up demand for debt advice is being built up among people who are currently receiving temporary support, but whose needs will crystallise when emergency support unwinds.
Meanwhile, the charity’s recent work highlighting the role of imposter advertising by lead generators for volume IVA providers has demonstrated how the debt advice sector can be open to abuse and there is real risk of harm to consumers seeking help to address their debt.
We also welcome the increased impetus to review the credit information market, and how well it works in delivering good consumer outcomes, especially for those who experience short-term financial difficulties.
The Covid-19 period in general, and our experience in developing the new short-term Covid Payment Plan in particular, have highlighted some of the barriers and tensions that exist, and the risk of perverse effects arising from the credit information market on consumer behaviour and outcomes.
We are also particularly pleased to see the recommendation of the FCA overhaul of forbearance in the light of lessons learned from the Covid-19 period, as well as the recommendation to improve and develop a more holistic vision of the whole debt solutions landscape, working with the Insolvency Service. These are both fundamental to delivering good outcomes for people experiencing debt.
The proposed review of repeat lending and persistent debt is another valuable recommendation.
Many of the other recommendations are also very important, in our view. The necessity of a regulatory level playing field across substitutable products (such as buy now pay later versus regulated credit, for example) is one of these.
So are specific callouts such as whether “credit builder” products are effective (reflected in our concerns in its Red Card report last year about how sub-prime “credit builder” cards rarely achieve that outcome).
These speak to the seriousness with which the review has understood the role of problem debt and its drivers, and a desire to pre-empt problems before they occur.
Our Director of External Affairs, Richard Lane, said:
“This report identifies multiple ways that the regulator can help the credit market to improve to benefit consumers, and we’re particularly pleased to see a focus on how debt problems should be addressed – and avoided.
"If the pandemic has shown us anything, it’s revealed that it’s not only our health that is vulnerable to sudden shocks – our finances are too. Chris Woolard’s recommendations on how the FCA should reflect the lessons learned from this period and apply them to future consumer protections show insight and clarity.
"We very much look forward to working with the FCA to act on these recommendations, and especially to improve the practical steps that can be taken to reduce debt problems in the UK.”