Andrew Bailey, chief executive officer of the Financial Conduct Authority (FCA) has said he does not view the shift to PCP based lending as ‘per se bad.’
Instead, he said: “It seems to me to recognise the nature of a car as an asset, that is, consumers are comfortable renting rather than owning the car.”
Ever since the FCA revealed plans to conduct an exploratory review of the motor finance industry, PCP has become a hot topic among the national press as an area of concern, with numerous titles calling for a clampdown on the product.
Recently Bailey has appeared to temper expectations around the nature of the FCA’s potential intervention in the market. Recently, he told the Guardian he considered PCP to be not ‘irrational at all’
This is not to say that the FCA is not looking at PCP, and Bailey clarified: “There are issues that we seek to understand on the terms of such lending and how well they are understood by consumers, so we are not complacent on such terms.”
Overall, he said the regulator was not complacent on about the overall consumer credit situation.
Across the consumer credit industry, he gave three broad points:” First, we use a range of policy tools. Sometimes a cap or limit on cost is appropriate, other times it seems more appropriate to use nudges and targeted transparency to change practices.
“Second, it is important that we understand the business models of firms, not because we want to dictate them, and firms must earn a return on capital, but understanding business models is important to see into the balance of returns from products and groups of customers, and to allow us to challenge and achieve our statutory objectives.”
The final point focussed on high cost credit, and he said it remained important that credit remained sensibly available to those with lower incomes and means. He added: “I am not convinced that we have an appropriate system in this country for the sustainable supply of such credit. The FCA alone cannot make this happen, but we have started discussions using our ability to convene to see what might be possible and how stakeholders could work together.”