Weekly blog by Philip King, CEO of the ICM - 'Firing the imagination'

I talked last week about the flurry of consultations being launched by government ahead of the summer holidays and, guess what, there have been even more since I wrote those words.  It feels like I have spent every waking hour of the last ten days ploughing through page after page of government documents and preparing questionnaires and summaries to share with our members so they can comment and offer their views.

The latest to hit my inbox was HMRC's consultation document: 'Sharing and publishing data for public benefit', a set of proposals that "form a significant development in HMRC's Open Data Strategy".  Judged by the title, you wouldn't imagine this has much to excite credit professionals but ­ as is so often the case ­ there are nuggets hidden away that are very interesting.  Indeed, I would go far as to say that this one has genuinely excited my imagination. Why is that?

In amongst the detail, the paper suggests the possibilities of releasing of basic non-financial VAT registration data as public data, and sharing more detailed VAT registration data on a more restricted and controlled basis for specific purposes, such as credit referencing.  It also considers whether VAT registration data could provide a foundation for private sector business registers.  It is this last point that lights my fire! I'm old enough to remember the Business Names Register (I think it was called) which allowed a supplier to identify a business.  It ceased to exist years ago and no doubt someone reading this will remember better than me the background as to why, and when.  Since its demise, the ability to identify a business that trades as a sole trader or partnership has been incredibly difficult, and the proportion of businesses on which the credit reference agencies are able to report is incredibly low because of the dearth of data available to them.  I know the VAT threshold is currently £79,000 so the smallest businesses wouldn't be picked up but it would still be a huge step forward.  According to HMRC, around 800,000 VAT registered businesses are not incorporated so making basic information available to credit reference agencies would at least enable a business's existence, location, legal status, and trade classification to be verified.

Of course we'd prefer to have financial information as well but let's keep our feet on the ground; that's not going to happen any time soon.  In the meantime, please let me know what you think (the ICM In-Brief newsletter published on 14 August will have a link to the document but it can also be found here so we can make HM Government aware of our views.

I'm off to Scotland for my summer break shortly and I'm grateful to Charles Mayhew, Sue Chapple, and Sue Kettle who've agreed to do me the honour of writing guest blogs while I'm away.  If you too are heading for some time of relaxation in the coming weeks then make the most of them.  This is the only time in the year when I genuinely turn off emails (despite what I may tell Mrs K at other times!).  I'll look forward to returning refreshed and re-charged.

Weekly Blog by Philip King, CEO of the ICM - 'Growing Responsibility'

It's the time of year - just pre-holiday season - when we normally expect to see a flurry of papers and consultations being issued by government to keep us occupied over the summer. This year is no exception and the last week has seen a bulging inbox.

To name but a few BIS has issued a call for views on its Corporate Responsibility paper, and produced a discussion paper entitled 'Transparency & Trust', and the Insolvency Service has published the report from Elaine Kempson's review into Insolvency Practitioner Fees, the terms of reference for the long-heralded review into Pre-pack Administrations, and its Annual Report for 2012-13.

The Institute will of course be considering these and submitting responses in due course but, having spent several hours over the last few days scanning the contents of papers, the longest of which is 89 pages, I do have a few initial thoughts.

The BIS Corporate Responsibility paper is looking primarily at what has more traditionally been called Corporate Social Responsibility (CSR). It seeks to define exactly what CSR is and how it can be encouraged, developed and reported on. One section looks at supply chain management
and I hope one of the issues identified is that of prompt payment and treating suppliers fairly. Given the impact of late payment on suppliers and, as a consequence, the wider economy this seems a very obvious way for businesses to be seen as acting responsibly. Conversely, making life difficult for suppliers and deliberately exploiting them is nothing short of irresponsible.

The BIS Transparency and Trust discussion paper (or perhaps tome is a better descriptor!)  covers a broad range of issues focusing on two primary themes: enhancing the transparency of UK company ownership, and increasing trust in UK business. The latter theme embraces a number of specific areas but includes insolvency through suggested changes to the disqualification of directors regime and the introduction of financial redress for creditors where directors have acted fraudulently or recklessly. I'm also encouraged by the suggestion of education for directors. I've had a long-held view that the ability for people to gain the privilege of limited liability without putting up any capital nor having to demonstrate any understanding of their responsibilities and obligations is unhelpful and leads to wide-ranging issues. The ICM's press release welcoming the discussion can be found here: http://www.icm.org.uk/statement-following-publication-of- transparency-and-trust/

The Transparency & Trust paper which can be found here also refers to the imminent review of pre-packs and the report from the Review into Insolvency Practitioner Fees and we'll await the Insolvency Service's response in due course with interest.

I'm encouraged that the government is looking at these areas. The provision of credit across all sectors always involves trust so the title of this paper, 'Transparency & Trust', puts it squarely in our space and I look forward to hearing the views of ICM members when we go out for their
input and views shortly.

Weekly Blog by Philip King, CEO of the ICM - 'Reading, writing and credit management'

Back in February the government announced a new draft National Curriculum for England that would see financial education embedded in both mathematics and in citizenship education, making financial capability a statutory part of the curriculum for the first time. The draft programme of study for citizenship would include the functions and uses of money, the importance of personal budgeting, money management and a range of financial products and services in Key Stage 3, and wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services in Key Stage 4.

 

This week, following a period of consultation, Michael Gove published the revised Curriculum and the financial education has been further strengthened by the inclusion of 'risk management' into Key Stage 3 and 'income and expenditure, credit and debt, insurance, savings, pensions' at Key Stage 4. Recognition is due to pfeg for its work in pushing for this enhanced content.

 

Providing education that allows children to leave school with financial literacy can only bode well for the credit profession in the years ahead if it means consumers are more financially aware. None of us wants to see people in financial difficulty through ignorance because they weren't sufficiently aware or informed.

 

In my blog last week I called for the OFT to ensure that affordability tests were genuinely being carried out by payday lenders to avoid the vulnerable being caught in a vortex of indebtedness. An interesting discussion has unfolded in response on the ICM Credit Community LinkedIn group (you can find it here) I don't agree with all the comments - simply outlawing payday lending could carry serious unintended consequences involving a growth in back street loan sharks, for example - but action in the short term is needed and, for the longer term, education will also play its part. Now we need to make sure teachers are provided with adequate tools to deliver the proposed curriculum content.

Weekly Blog by Philip King, CEO of the ICM - 'The need for speed'

My blog on 21 March referred to the OFT's Payday Lending Compliance Review and I said that the proposed investigation by the Competition Commission made sense. I was pleased to hear confirmation at the weekend that the investigation is going to take place. It will take about twelve months for the investigation to be completed so, not surprisingly, there is a clamour for more urgent action to be taken. A banning of payday loan adverts and capping the amount of money that can be made from an individual loan are among the suggestions.

 

I was sorry I was unable to attend the Summit chaired by Jo Swinson, the consumer minister, on Monday which brought together lenders, regulators, charities and consumer groups but I hope that it will deliver more than just Words.

 

I said previously that one of my biggest concerns was the apparent absence of adequate affordability assessments ahead of the granting of loans. This must surely be the biggest issue: if loans are being made to people who don't have the capacity to repay them then the only outcome will be misery. In the interim, this is one key area that can be fixed. The OFT report earlier in the year said that "most lenders asserted that they undertook affordability assessments at the initial loan stage yet the vast majority were unable to provide satisfactory proof that they had applied such assessments in practice.

Only six of the 50 lenders visited were able to provide documentary evidence that they assessed consumers' likely disposable income as part of their affordability assessments."

 

Alongside its other tactical measures, the OFT should focus on this by insisting on evidence of affordability tests being carried out, raise the bar in terms of the depth and frequency of its compliance testing, and take action when there is evidence of failure. Let's see it use its teeth to good effect and throw out the bad apples in the sector; the worst possible scenario is for the world to sit on its hands while the Competition Commission carries out a thorough but painfully slow investigation.

Weekly Blog by Philip King, CEO of the ICM - 'Square pins and round holes'

I attended a board meeting of the Start-Up Loans Company this morning. It's always an invigorating experience and today was no exception. The scheme has now issued over 5,000 loans and recently been extended to Northern Ireland. Work to test the feasibility of extending loans to those aged over 30 is progressing, and I'm hugely proud to be involved with a project that is delivering opportunities to create businesses by providing access to funding that wouldn't otherwise be available.

One of the discussions today reminded me of a book I read some years ago - 'Now, discover your strengths' by Marcus Buckingham and Donald Clifton. It made a big impression on me at the time and the board meeting debate, although in a different context, reaffirmed the principles.

 

I'm sure I'll get some of the details wrong so apologies in advance to Messrs Buckingham and Clifton but the central theme of their book is that we all have innate strengths which we should cultivate and on which we should focus rather than spending too much time on areas in which we are inherently weak. It proposes this approach from a personal perspective and when recruiting and managing staff. Organisations spend too much time (through appraisals and such like) in identifying weaknesses in people and trying to improve them. Surely, the book argues, it makes more sense to identify what we (or people) are best at and devote time to getting even better than to invest that time in moving from poor to mediocre in something. Using a football analogy, you wouldn't coach a good goalkeeper to become better at scoring goals, you simply drive him to become a better and better goalkeeper. Yet how often do we fall into the trap of wanting a square pin to fit better into a round hole?

 

Why, continuing this theme, do we focus our energies on the poorer performing organisations and want them to deliver more, when we should be devoting our energies to the best. If we did, then so much more could be achieved: 10% improvement from the best is always going to be more, by definition, than a 10% improvement from the worst.

 

Someone said this morning - and it was a timely reminder - that we should commit our resources to the biggest opportunities that will deliver the greatest benefits, not always be driven by numbers and absolutes. Time is a limited resource and we all have to make choices about how we use it. Where it can deliver the most and move us closest towards our goals seems a good guiding principle to me.