DMT Insider: The changing debt landscape

Last week saw a meeting of minds as companies representing both the fee and free sections of the market united to discuss oncoming regulatory change and the effect it will have on the future of debt management.

Debt Management Today’s Miranda Atty attended the Money Advice Liaison Group (MALG) annual Conference and Exhibition, this year entitled ‘The changing debt landscape – a change for the better?’ to find out more...

The event began with a chance to wander the exhibition hall, where exhibitors included the Office of Fair Trading (OFT), the Consumer Credit Counselling Service (CCCS), the Institute of Money Advisers and the Money Advice Trust.

After a welcome by the Chair of the Conference – freelance journalist and broadcaster Liz Barclay, who has been involved with the debt sector for 20 years – delegates took part in a Points of View session, which included a discussion about the pros and cons of a possible rule book on debt management from the Financial Conduct Authority.

Concerns were raised by delegates who felt the rule book might be too inflexible for the market, or that a prescriptive rule book might not leave room for complementary self-regulation.

After the session, there were four optional workshops to attend. Anthony Sharp, Chair of MALG, said of the sessions: “I believe each workshop held its surprises this year. There is no doubt that they all stimulated useful discussions and thoughts.

“There is no doubt that there remains serious concern over the plans for funding and commissioning of free-to-client debt advice by the Money Advice Service. What will these plans mean for debt advice; is the industry confident that The Money Advice Service will come up with the right menu and perhaps the question on so many people’s lips is do they understand the debt advice sector sufficiently to make the right decisions.

“There is deep concern in many quarters about the demise of The Office of Fair Trading and indeed the Consumer Credit Act. The audience at the beginning of the day gave a resounding ‘no’ to being governed by a Rule Book under the Financial Conduct Authority over Statute Law under the Office of Fair Trading will be ‘throwing the baby out with the bath water’. The OFT is probably the most professional of the regulators in the industry and certainly the regulator with most power.”

During the workshop: “Preparing for a future debt and personal finance sector – 2016 – what will the landscape look like?” questions were raised as to whether the total level of personal debt will be higher, lower or the same in 2016. The general consensus was that, whilst personal debt will rise, it will be a slow upward curve. Furthermore, by 2016, the group believe the profile of the typical debtor will be more a middle-class entrant into the debt market who may previously have held a good job.

David Hawkes, of Advice UK, spoke of an increased demand for debt advice in 2016 and a smaller free sector. He also suggested there will be fewer debt advice centres, fewer paid advisors and more volunteers.

The second workshop session attended was “Continuity and change: developments in the regulatory landscape” with Louise Marfany, Head of Corporate Communications, Consumer Credit Group, OFT. During a spirited discussion by delegates, topics ranged from a proposed Debt Management Plan Protocol, to the economy giving rise to new pressures, to whether the OFT has enough powers to clamp down on those in breach of regulatory guidelines.

There were some criticisms of the OFT for not having the ‘speed to jump on people’ but Louise stated that the OFT has been working flat out to make “debt management a focus during the last twelve to eighteen months.”

Also under scrutiny were Debt Relief Orders (DROs), criticised by some for being too narrow – leading to a number of clients who fall through the gap, being neither eligible for DROs nor bankruptcy.

The group highlighted that consumer redress is something they would like to see, either from the OFT or from the future Financial Conduct Authority. Louise emphasised that the OFT are, “engaging with the government in terms of what we think will make a better regime in the future. We are completely neutral and whatever happens, the point is that dialogue is really important.”

After the workshop sessions concluded, there was a conference summary, which stressed the key words of the day:

-      Consistency (of outcomes for clients)

-      Triage

-      Partnership/collaboration (rather than competition)

-      Flexibility.

Anthony Sharp concluded: “I believe it was another successful event and we had over 230 registered delegates. This was very heartening bearing in mind the financial restrictions that both creditors and advisers are presently working under. Many felt that the subjects of the workshops were very robust this year and allowed plenty to get your teeth into.”

As the conference is one of the rarer events which brings together both fee-paying and free-to-consumer companies, I wanted to know from Anthony whether he felt the event helped strengthen relationships between them. He said: “MALG has always tried to be inclusive in its membership both through National MALG and its six Regional Fora. Both DEMSA and DRF are now full members of National MALG and most of the Regional Fora have a healthy membership of fee chargers as well as free-to-client debt advisers.

“Our Conference is no different and we are always delighted to welcome all debt advisers, free or fee. I would like to think that this bringing together of both sectors does indeed improve and strengthen relationships. It is vitally important as this should go a long way to encouraging best practice in both sectors.

“Interestingly, the ‘rotten apples’ in the basket of fee chargers never come anywhere near such Discussion Fora or Conferences, but then they would not would they, as they may find the sunlight too bright for their eyes.”