Weekly Blog by Philip King, CEO of the ICM - 'Neither borrower nor a lender be?'

I was in Basel earlier this week for the ICTF Conference. It's always a good opportunity to catch up with credit professionals from around Europe and beyond, and great to hear some of the issues being faced and how they're being addressed.

 

Flights and travel gave me the opportunity to read the FCA's recently published consultation: 'Detailed proposals for the FCA regime for consumer credit'. We'll be providing the opportunity for members to submit comments through our November ‘In Brief’, and I won't go into any detail on the 193 pages, nor the 387 pages of the Appendices here. I do though want to make just one comment about the FCA's stated intention to focus on the Payday Loans sector.

 

I've written several blogs over recent months arguing that the OFT should, in its final year, take action over the absence of evidence that affordability tests are being adequately carried out by payday lenders. I've consistently asserted that this is the key failure of the market and should be addressed with vigour. It should, after all, be the determinant in all credit decisions regardless of sector, size or nature.

I've given up hoping that the OFT is going to take any serious action on this in its final days but I was encouraged to read these words in the consultation: "Our proposals.........are based on the principle that money should only be lent to a consumer if the consumer has the ability to repay and in a sustainable way." And in his foreword, FCA Chief Executive Martin Wheatley says: "The OFT affordability guidance is good, but the OFT’s own research shows too few firms implement it. We will put it into our rules and guidance, and enforce this."

 

Martin's last two words are the most important - let's hold the FCA to account and ensure it delivers.

 

 

Weekly Blog by Philip King, CEO of the ICM - A positive step for debt management'

The OFT published its Debt Management (and Credit Repair Services) Guidance last week, following consultation last year, and this represents a positive step in improving compliance across the debt management sector. The guidance can be found here and will also be signposted in the ICM Briefing due to be issued to members shortly after Easter. Three things have struck me as worthy of note from an ICM perspective.

Firstly, credit professionals should be aware of the creditors' responsibilities highlighted in the guidance. For example, in paragraph 3.48, it says "the OFT expects creditors to have appropriate regard to this guidance when dealing with third parties acting on the client's behalf. Creditors should not refuse to deal with a debt management business or other third party unless the debt management business or third party failed to comply with relevant consumer protection legislation and/or have appropriate regard to this guidance. Under such circumstances, the creditor should be able to satisfy the OFT that it has an objectively justifiable basis for refusing to deal with the other party if asked to do so. Creditors who provide advice to customers who are behind with their payments should have regard to the spirit of this guidance". This, together with the following paragraph 3.49, is particularly relevant to many credit professionals and we should be mindful of it.

Secondly, I am pleased that our contribution to the training within the sector has been recognised. The guidance says that "licensees should have adequate training in place for staff, agents (such as self-employed debt advisers) and franchisees acting on their behalf, to ensure they are sufficiently skilled and knowledgeable to carry out their role", and the ICM is included in the list of examples of accredited training.

Finally, the example of unfair or improper business practice have been modified with the reference to dividing available income between debts in proportion to their size being removed. The Institute argued that the requirement to introduce what, in some cases, would be subjective judgment could be unhelpful to creditors and work to their detriment. I'm pleased our voice was heard and is reflected in the final version.

P.S: I'm on holiday next week and have been reliably informed I will be having a week free of Twitter, blogs and email so I'm delighted my good friend Josef Busuttil (my counterpart at the Maltese Association of Credit Management) has agreed to write a guest blog.

Weekly Blog by Philip King, CEO of the ICM - 'A source for good'

A slightly unusual topic for me this week prompted by recent personal experience. I was involved with a police force at the weekend about a missing person. The details and circumstances aren't important but the police wanted to know everything I knew about the missing person who has gone AWOL many miles from home and may need help.

My wife and I shared all we knew (which wasn't much to be honest) and my wife referred the police to Facebook which included a number of friends in the area where they were looking, and had comments that might give clues as to their whereabouts. We were asked if we had a picture of the individual and we confirmed we had but pointed out that a more recent and clearer one was on Facebook.

Extraordinarily, a few minutes later we received a phone call asking if we could download the picture and email it, along with any other relevant information, because the police didn't have access to Facebook and so couldn't use that source of information! I don't know if this is common to all police forces and I don't know the detailed reasons why access is denied but - in today's age - I was incredulous that such a productive source of information couldn't be used!

I discussed the use of Facebook in tracing debtors following the release of the OFT's Debt Collection Guidance a few weeks ago and shared my view that the content of the guidance was being misrepresented by the media. We've also recently heard the ongoing debate about how social media was insufficiently monitored during the riots across the UK in the summer.

Social media is a powerful tool that can be used for good - as well as bad - but it strikes me that the potential 'dangers' of Facebook et al and sensitivities over privacy, while understandable, are getting in the way of progress. It certainly seems absurd that the police could not pursue what to me would have been a blindingly obvious line of enquiry.

Whether we like it or not, social media is here to stay and we can't just ignore it. The ICM has heavily embraced Twitter, LinkedIn and Facebook because we know a proportion of our members are using them and we see many benefits.

I fear, however, that in certain cases bureaucracy is winning and the loser is someone who could really need help!

Weekly Blog by Philip King, CEO of the ICM - 'The changing 'Face' of Debt Guidance'

Since mentioning the publication of the new OFT Debt Collection Guidance in my blog last week, I've now had chance to look through it in detail. No great surprises; it's very similar to the draft on which we were consulted some time ago and says what I guess we'd all largely expect it to say. It is, after all, only an update of the version of the document issued in June 2003.

The aspect that seems to have caused the greatest debate on the ICM Credit Community LinkedIn group, and elsewhere, is the OFT warning to debt collectors not to use social networking sites such as Twitter and Facebook to pursue people who owe them money. I don't want to be pedantic here but I'm not sure that's exactly what it says. Actually what it says is that unfair or improper practice would include 'acting in a way likely to be publicly embarrassing to the debtor...' which includes, as one of the examples quoted 'posting messages on social networking sites in a way that might potentially reveal that an identifiable person is being pursued for the repayment of a debt'. That's a long way from banning the use of Facebook!

I might be showing my age here but I remember lecturing ICM evening classes at Watford College in the 1980's and recall teaching about s40 of the Administration of Justice Act 1970 which addressed the unlawful harassment of debtors and included the works: 'A person commits an offence if, with the object of coercing another person to pay money claimed from the other as a debt due under a contract, he harasses the other with demands for payment which, in respect of their frequency, or the manner or occasion of making any such demand, or of any threat or publicity by which any demand is accompanied, are calculated to subject him or members of his family or household to alarm, distress or humiliation'.

So nothing has changed really; in those days, the example of harassment was parking a van outside someone's house with the words 'debt collector' written on the side. Surely all we're talking about here is the 2011 equivalent? There's nothing wrong with using social networking tools to find people or to learn more about them but harassing people by any means is - and must be - unacceptable. Those who have seen me present using a baseball bat as a visual aid will know that such a bat is an equally unacceptable collection tool!

I am intrigued by the following words in the Foreword: 'This guidance document is not intended to provide a basis for debtors to avoid the repayment of debts duly owed. We consider that debtors should take responsibility for engaging appropriately in the debt recovery process...'. On the one hand, I am encouraged by its inclusion; on the other, the fact that they have to write these words at all makes me think that the document is weighted heavily in favour of debtors. We shouldn't lose sight of the fact that taking on debt carries with it an obligation to repay it, and that should always be the starting point.

The Guidance carries considerable detail and Consumer Credit licence holders would do well to read it and ensure they, and any third party organisations working for them, are complying with it.