Microcredit in the UK
At the very beginning of its formation, microcredit, or as it is called, "loans to pay" in the UK hardly regulated. With the advent of several regulatory authorities and organizations have begun a much-needed changes in the micro-finance schemes. Below we look at some regulatory agencies and the history of their creation.
Office of Financial Regulation and Supervision (Financial Services Authority)
Office of Financial Regulation and Supervision is responsible for regulating the UK financial sector from 2001 to 2013. Department carries out its activities independently of the public authorities, at the expense of financial companies operating in the sector.
History of the Office of Financial Regulation and Supervision
Office of Financial Regulation and Supervision appeared in 1985 under the name of The Securities and Investment Board Ltd. In the 1990s, the organization was involved in a series of scandals, so it was decided to terminate the self-regulation of the financial services markets. Instead, it created a single supervisory body responsible for the regulation of all financial services markets.
Therefore, in 1997 the name of the organization was changed to the Office of Financial Regulation and Supervision. In 2000, the Law on Financial Services and Markets Act of the Office of Financial Regulation and Supervision of certain powers and defining the scope of its responsibility, including supervision and regulation of trading in futures and stocks - those functions transferred to it from the Office of the Securities and Futures (Securities and Futures Authority).
Before the Office of Financial Regulation has been renamed to the Inspectorate for the Supervision of Financial Institutions (Financial Conduct Authority), it is responsible for the regulation of insurance companies, banks, and mortgage lending industry and companies engaged in financial consulting. All this happened before the advent of microcredit: this kind of financial services began to develop rapidly in the UK for just 5 years ago.
The financial crisis in 2007 led to the collapse of the UK economy. After these tragic events, it was decided to restructure the entire system of regulation, so in April 2013, the functions of the Financial regulation and supervision were transferred to the Inspectorate for Control over the activities of financial institutions.
Inspection control over the activities of financial institutions (Financial Conduct Authority)
Inspection control over the activities of financial institutions involved in the regulation of financial services companies in the UK, the prevention of violations and protection of consumer rights. That inspection is responsible for regulating the sphere of micro-credit in the UK. Inspection is headed by Martin Wheatley (Martin Wheatley), who previously served as head of the Commission on the Securities and Futures Commission in Hong Kong.
History of the Inspectorate for Control over the activities of financial institutions
Royal Assent to create the Inspectorate for Control over the activities of financial institutions was received in December 2012 and in April 2013, the Office of Financial Regulation and Supervision to stop their work. As a result of these changes directly responsible for the financial stability of the economic system of the United Kingdom took over the Bank of England. Thus, the new supervisory structure combined the functions of the Inspectorate for Control over the activities of financial institutions, the Financial Policy Committee of the Bank of England and the prudential supervision services.
Inspection function to control the activities of financial institutions
The activities of the financial sector in the UK, including the segment of micro-credit is regulated by the Inspectorate for Control over the activities of financial institutions. This supervisory authority has all the powers to oversee the implementation of any financial products through the introduction of minimum standards and new rules allowing for effective implementation of financial products and the protection of consumer rights.
Microcredit in the UK has always been the subject of extensive discussion, one of those who - television advertising techniques to paycheck loans used by microfinance institutions. Opponents of such advertising say that it looks even children who are beginning to put pressure on their parents, so they took a loan for which a non-essential purchases. In this case, the inspection control over the activities of financial institutions have full authority to make decisions: it determines which ads to payday loans to ban or otherwise control.
In addition, the Inspectorate has the authority to develop and implement standards for the products of the financial sector. Microcredit is perhaps the best example of the use of such powers in recent years: the recent inspection for control over the activities of financial institutions introduced here the new, more stringent rules. In particular, price caps were introduced, and limits on the total cost of the loan in favor of borrowers. The purpose of the new rules - not to give borrowers to get into debt bondage and prevent microfinance institutions to set sky-high prices and tariffs.
Inspection control over the activities of financial institutions have the right to conduct investigations in relation to financial institutions for compliance with established standards, minimum requirements and best practice standards. In the process of inspection control over the activities of financial institutions will be entitled to ban certain financial products and their promotion, if they violate existing rules. All this has led to the fact that in recent years a large number of microfinance institutions and brokerage ceased its activities.
In the previous article we looked at the activities of the two organizations - the Office of Financial Regulation and Supervision and Inspection control over the activities of financial institutions. We talked about the history of their creation, their role and changes in the segment of micro-credit in the UK market and other financial products and services that have occurred through the intervention of the Inspectorate for Control over the activities of financial institutions.
In this article we will discuss in more detail in other supervisory bodies, as well as several organs that do not perform regulatory functions.
Committee on Financial Policies (Financial Policy Committee)
When the Bank of England established a Committee on financial policy, which is responsible for monitoring the stability of the financial system in the UK. The main task of the Committee - monitoring the macro and microeconomic indicators, and on this basis to identify potential threats to the country's economy.
Monitoring functions economic situation in the United Kingdom went to the Committee by the Office of Financial Regulation and Supervision in 2012, after the dissolution of the Office of Financial Regulation and Supervision Inspection and appearance to control the activities of financial institutions. The Committee is working to identify potential economic risks and further transmits information about them in the Service of prudential supervision, which takes appropriate action.
Service prudential supervision (Prudential Regulation Authority)
Committee on fiscal policy - not a single supervisory body established after the closure of the Office of Financial Regulation and Supervision. On the basis of the Office was also formed service of prudential supervision. The service is responsible for the prudential regulation, monitoring and implementation of standards in the financial services sector. The service is officially owned by the Bank of England was established to support the implementation of standards of best practices in financial companies. In addition, the task of the Service - to ensure protection of the rights of the insured persons and consumers in the case of professional incompetence and gross negligence, particularly in the insurance market.
The economy, to provide the necessary financial services of good quality - is a healthy economy, so the responsibility of the Service of prudential supervision is to maintain and ensure a healthy and sustainable growth of the UK economy.
Service attitude of prudential supervision to perform their duties is characterized by three features: the focus, foresight, expert evaluation. In assessing the financial companies Services of prudential supervision, in particular, take into account their financial viability and their compliance with established standards in the provision of services to consumers. The service also assesses current and potential risks and, if necessary, take appropriate action. The focus of prudential supervision service paid to those companies and the factors that threaten economic and financial stability of the country.
Service collaborates with the prudential supervision by the Inspectorate for Control over the activities of financial institutions, which in recent years has had a serious impact on the activities of microfinance institutions in the UK, introducing new standards and stricter rules.
The authorities do not fulfill regulatory functions, but affecting the micro-credit in the UK
The association of consumer credit (Consumer Credit Association)
The association of consumer credit - credit and oldest trade association for the UK. The objective of the Association - to guarantee the validity of the received law, so the Association on behalf of its members in negotiations with government authorities and regulatory authorities. The Association's goal - to prevent the deterioration of the various industries in connection with the adoption of new legislation.
BCCA was originally a trade association representing the interests of companies that were engaged in cashing checks, hence the name - British Cheque Cashing Association (Association of companies cashing or BCCA). Today BCCA represents the interests of a variety of microfinance institutions, issuing short-term loans and loans to the salary, as well as pawn shops and points of exchange of checks.
The association of consumer finance
The association of consumer finance - another trade organization representing the interests of the UK companies involved in issuance of loans to pay. The association has not so many participants, but among them - the largest players in the segment of micro-credit.
Charitable organizations in the industry
Charitable Organization Stepchange, helps consumers who have got into debt, created to protect the interests of borrowers. In addition, Stepchange activities aimed at informing the borrower on the impact of the debt and the difficulties that may arise from the borrower and his family, caught in debt bondage. With this awareness Stepchange changing society's attitude to the habit of taking money on credit. Experts Stepchange give consumers free advice on debt. In addition, the organization offers a variety of services that enable customers to reduce their debts and eventually get rid of debt.
Services Stepchange, enabling consumers to fully pay debts:
- Stepchange provides customers assistance in drawing up a simple, realistic and affordable repayment plan.
- In addition, the organization offers individual schemes voluntary debt settlement (Individual Voluntary Arrangement), according to which the consumer pays a reduced amount of debt within 5-6 years, and the balance of reduced debt written off at the end of this period.
- For borrowers with low annual income and debt of less than 15 000 pounds Stepchange offers a service to order the release of the debt (Debt Relief Order).
- Owners of real estate at the age of 55 years and older Stepchange proposes a scheme of credit secured by real estate, through which the owner receives a tax-free funds on the security of their property.
- You can also get free advice on mortgages.
The owners of microfinance institutions
This type of activity as the issuance of short-term loans, appeared in Britain around 2005. One of the first players in the market was the company Payday UK, subsequently acquired US Dollar Financial UK Ltd. Many large companies have long engaged in microfinance are owned by foreign, particularly American companies. These include not only Payday UK, and Quick Quid, Payday Express, The Money Shop, Speedy Cash (www.speedycashloans.co.uk), Sunny (www.sunny.co.uk). Today, all of these companies own US companies.
Most of these companies were previously privately owned, were sold to the Americans after US companies, destroying their own market, began to look for new markets in English-speaking countries. This was the cause of the large number of new companies in Canada, the UK and Australia. Microcredit Market in the UK to be attractive for American corporations as well as the regulation is virtually absent, and existing regulatory frameworks in the best case was very limited. This gave impetus to the rapid growth of microfinance institutions that have managed to earn good money.
The company Wonga, perhaps the most famous in the UK credit institution was founded originally from South Africa, but now it belongs to more than one company in the field of corporate finance, which supported the organization during its sustainable growth. When it became known that Wonga unfair, not to say bad, treat your customers, for the company fell on hard times.
Another dishonest company that was accused of fraud, - Cash Genie. After the company was sold to the American Eazy Corp, the new owners have found that the management of the company has been so ineffective, and attitude to customers - bad that they had to stop issuing loans and return more than 20 million dollars to customers to compensate for the bad attitude.
In the UK financial services sector are many bona fide independent players, the owners of which are still British companies. For example, some smaller microfinance institutions that offer loans to their customers to pay, still run by their owners. Among these companies - True Blue Loans. These companies have managed adequately through difficult times due to the high quality of customer service than can not always boast of large organizations. In particular, companies that manage the American owners, apparently believed that the business should be conducted in the UK in the same way as in the US. Therefore, they should not count on the generous attitude of the British.
Today, microfinance institutions that are owned by Russian companies in the UK quite a few (or have none at all). Perhaps the Russians are just waiting until the inspection control over the activities of financial institutions did not displace from the market of unscrupulous players. It is likely that after this they will acquire British credit institutions or to establish their own.