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Woolard Review of unsecured credit: preliminary thoughts


Iain Ramsay


Media coverage of the recent Woolard Review here of unsecured credit has focused primarily on its recommendations for regulation of the buy now pay later sector. Here are some initial reactions to other suggestions in the Review (Woolard in bold).

Ensuring strong provision of debt advice and debt solutions, including close attention to problems created by fee structure of IVAs and challenges of low income individuals who have limited options, for whom it is unfair to ask to pay £90 for debt relief. Government should consider if fee could be amended ‘but like other fees based on a cost recovery basis’.

Nothing very radical here. Problems with IVAs have been highlighted for several years. £90 fee shown to cause difficulties. But note the reservation that the fees should be based on cost-recovery. At present Insolvency Service makes a profit on DROs.

Should be coherent and consistent vision of the debt solution market and its regulation.

Hard to disagree with this, given existing situation of multiple regulators.

Ensure that there is a long term multi-year strategy in place for secure funding of debt advice.

Again this seems self-evident but too much of a focus on providing individual debt advice may divert attention from more broad based approaches to debt-write down.

FCA should review how forbearance is reflected in credit information (such as the masking of credit files) and how this affects decisions by lenders and consumers. In particular ensure consistent and adequate reporting. A later recommendation suggests the need to build a better credit information market, underpinning a sustainable credit market and better lending decisions.

The credit information market in the UK definitely needs further study. High quality credit information is of course an essential part of a consumer credit market, recognised at a theoretical level in the pathbreaking economic work of Stiglitz and Weiss’s analysis of problems of asymmetric information in credit markets.
Credit reference agencies are one approach to reducing information costs. The market for credit information in the UK is dominated by a few large multinational corporations. Significant aspects of credit information are not regulated through legislation or delegated regulation in the UK but decided through the probably little known Steering Committee on Reciprocity. For example the length of time a bankruptcy or Debt Relief Order remains on a credit file seems to be determined through this body rather than in other jurisdictions where it is determined by legislation, providing opportunity for greater public discussion and analysis.
Existing research by the FCA has drawn attention to issues such as substantial differences between data held on an individual by different agencies, and different practices of lenders in the reporting of information. At the same time proposals have been made for more extensive information to be placed on a credit file (such as rental payments) in order to allow individuals with thin credit files to build a better credit score.
The increase in digital lending along with the use of novel forms of creditworthiness assessment such as borrowers’ use of social media and phone activity as a substitute for traditional forms of credit information, require further analysis.
This area certainly requires more policy work, recognizing that the regulated here are large and powerful organizations and that regulators such as the FCA may have complex relations with them, since they probably rely on them significantly for policy information.

A sustainable market needs more alternatives to high cost credit.

This has long been a policy objective. Woolard proposes the expansion of credit unions as an important alternative and an update to the Credit Unions Act 1979. The expansion of credit unions has been an objective at least since the Crowther report in 1970 and they have been promoted as an alternative to payday loans. Certainly the various initiatives over the past 20 years have resulted in the growth of some credit unions with increasingly sophisticated technology and lending which may provide an alternative for some consumers. Limits may exist on them replacing payday loans since significant numbers require a savings history before lending and may not be able to have an application dealt with immediately.
They remain a small part of the consumer credit market. 2020 statistics indicate around 277 credit unions across England, Scotland and Wales with 1,428,641 people using credit unions, total assets of £1.82 billion, loans of £1.1 billion, deposits of £1.54 billion and an annual turnover of £137 million.

Woolard also suggests the promotion of community lenders and greater involvement of mainstream lenders in getting involved by overcoming the reputational and regulatory risks of entry to these markets. This last alternative draws on the inspiration of the US Community Reinvestment Act of 1977.

None of the above recommendations for alternatives to high cost credit are novel.
One might ask therefore whether more focus should be on developing a better social security system. Woolard mentions this briefly in suggesting more study of the impact of different social policies on the demand for high-cost credit.

A sustained market needs to be underpinned by regulation focusing on outcomes and how consumers really use credit.

That the FCA should take an “outcomes based approach” to regulating the consumer credit market is not novel. The Treating Customers Fairly initiative in 2006 adopted this approach as part of a “principles based” approach to regulation which would move away from detailed rules and a tick box approach to compliance.



  1. […] Woolard Review of unsecured credit: preliminary thoughts Academic blog: Media coverage of the recent Woolard Review here of unsecured credit has focused primarily on its recommendations for regulation of the buy now pay later sector. Here are some initial reactions to other suggestions in the Review. […]

  2. […] Woolard Review of unsecured credit: preliminary thoughts Academic weblog: Media protection of the new Woolard Review right here of unsecured credit score has centered totally on its suggestions for law of the purchase now pay later sector. Here are some preliminary reactions to different tips within the Review. […]

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