Question and Answer with Geraint Thomas, Partner, Eversheds

Geraint has been a partner at Eversheds since 2003 and specialises in Retail Finance. His particular expertise is in Consumer Credit, Mortgage Regulation and savings/deposit products. His product experience includes first and second charge residential mortgages, buy to let and commercial mortgages, lifetime mortgages, home reversion plans, unsecured loans, credit and store cards and savings products. He also advises on sale and purchases of loan portfolios and securitisations.

What do you see as the key themes in the marketplace at the moment?

At the moment the new Consumer Credit regime post transfer to the FCA is still very much in its infancy and one of the main challenges we are seeing is how the Authority is coping with the sheer volume of applications going through them. Handling the work they have as part of the authorisation process is significant.

Secondly, with the Consumer Credit and the Mortgage Credit Directive changes, there are anomalies in the legislation – things cropping up that aren’t massively significant in themselves, but inevitably when you’ve got a lot of legislative and regulatory changes, points get missed or have unintended consequences that need to be put right. Broadly speaking the Treasury and FCA have been pretty positive in addressing these, but it takes time and sometimes requires legislation.

Thirdly, we have the combination of an expanding market and people trying to deliver new products, new lending and new entrants coming to market dealing.

The big issues in the market at the moment are affordability and responsible lending. These seem to be the key points of feedback on a lot of the business plans that have gone to the FCA so far – ensuring that firms have appropriate processes in place to deliver this. This is much like the mortgage market was with MMR a year or so ago.

Are you seeing an increased demand from new lenders coming into the market?

We’re seeing demand across many markets. One of the busier markets for new entrants at the moment looks to be equity release, due to some of the insurance regulatory changes making this an attractive asset class. In addition, in the mortgage market, there’s a strong interest in buying assets in particular. We’re also seeing interest in some of the more niche consumer credit markets such as premium funding, goods financing, new types of smaller ticket consumer lending. The second charge market is also showing signs of growth, which is interesting considering the transfer of regulation that’s imminent. We’ve seen a couple of new providers launching this month before the new regulations go live, so they’ve got their systems in place and a presence in the market ready to go post the Mortgage Credit Directive next year.

What do you see coming up on the regulatory horizon?

In the short term, we’ve got the Consumer Rights Act, which is an area where we’re seeing a lot of interest at the moment. This is primarily in the banking sector for current accounts and deposit accounts, but also people starting to think about the focus for mortgages, credit cards. The act itself involves quite significant change and so it raises a number of questions around areas such as what does ‘transparent’ mean, what does ‘prominent’ mean, etc in different product contexts.

In the medium term, the review of the Consumer Credit Act is obviously going to be important. It does look increasingly anomalous to have the arcane rules about modifying agreements and statements, prescriptive sanctions, etc. In the modern era of outcome based regulation.

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