A key part of being a responsible business involves complying with the rules and regulations that are relevant to our activities. As such, we are proactive in monitoring policy and legislative developments that relate to the way we operate, and how we deliver our products and services to our customers.
The Provident Financial group is regulated under the Consumer Credit Act 2006 which updates and adds to the Consumer Credit Act 1974. The 2006 act modernises consumer protection, and enhances fairness and transparency in the marketplace.
- Compliance with the Consumer
Credit Act 2006
- During 2007:
- An 'unfair relationship' test which replaces the 'extortionate credit' test specified under the 1974 Act was introduced.
- An alternative dispute resolution scheme was established to cover any consumer credit complaints that may occur. This entitles customers to refer complaints to the Financial Ombudsmen Service after they have first raised the matter with the company concerned.
- In 2008:
- We will be required to comply with two remaining amendments:
- - From April we will be subject to a new consumer credit licensing regime
- - From October we will need to provide customers with annual statements
Provident Personal Credit and Greenwood Personal Credit are members of the Consumer Credit Association, which represents the majority of businesses in the UK home credit industry; and also voluntarily subscribe to the Association's Code of Practice which, among other things, commits us to conduct our operations lawfully and trade in a fair and responsible manner. They, along with Real Personal Finance and Vanquis Bank, hold consumer credit licences.
Vanquis Bank is also regulated by the Financial Services Authority (FSA). Regulation by the FSA is driven by eleven principles for business each of which sets out, in simple terms, an obligation expected to be achieved by the regulated financial institutions plus the level of high standards to be attained. Principal six of this regulatory regime - the Treating Customers Fairly (TCF) initiative - deals with respect for the interests of the customer and fair treatment. The TCF initiative forms part of the FSA's wider goal of ensuring that retail customers achieve a fair deal. Since 2006, Vanquis Bank has made a significant amount of progress in terms of embedding the principle of TCF within its operations, products and service.
- Establishing a TCF committee which is made up of representatives from across the business and is chaired by one of the Bank's non-executive directors.
- Undertaking a gap analysis of the Bank's business processes against the requirements of TCF. This resulted in five individual work streams being identified.
- Developing a TCF strategy document for the company which is signed off at board level and focuses on embedding the TCF programme within the governance and culture of Vanquis Bank.
During 2008, the following further activities will be carried out:
- By March, the introduction of appropriate management information or other measures to test whether Vanquis Bank is treating its customers fairly.
- By December, full integration of the TCF framework with the expectation that Vanquis Bank will be able to demonstrate that customers are consistently being treated fairly.
The Competition Commission inquiry into home credit
A key regulatory development in 2007 was our work with the Competition Commission and other parties to implement the four remedies designed to provide increased competition in the home credit market.
All home credit companies will be required to share data with credit reference agencies, to publish their prices on an independent website, to provide statements for customers on request, and to adjust early settlement rebates more in favour of the customer.
The EU Consumer Credit Directive
The European Parliament adopted a new text for a Consumer Credit Directive in January 2008. The directive was formally approved by the European Council of Ministers in April 2008 and will have to be implemented by member states within two years, meaning that it is likely to become law by late 2010. The Directive will harmonise rules on advertising, pre-contract information and the content of credit contracts. There is also a new obligation to assess the creditworthiness of the customer, a right of withdrawal from any contract and revisions to the calculation of early settlement rebates. The new Directive will replace the existing Directive dating from 1987 that currently applies across the 27 EU member states.