The FCA and Provident Credit

There are times when we have been called a bit thick, we’ve all had our dumb moments and this maybe one of them. But we wanted to air some questions about the Provident Credit issue and the role of the FCA in it because we just don’t understand it.

We should first explain that we contacted the FCA’s press department but they politely refused to answer any questions citing that we weren’t journalists and they would not engage – so we did try to get their side.

The background is this, last week we all became aware of the issues at Provident Credit. We had been aware for about 5-6 months that something was ongoing, but we didn’t know what. Then as the week drew on, we got more details about more problems – such as an FCA investigation into their practices and the breakdown in IT. The IT is one thing, it could happen to anyone in business so that isn’t in the scope of this article.

What we really want to focus on here is the role of the FCA, the worth of their licensing process and their enforcement activity.

Obtaining Permission

Having been through the licensing process with the FCA to become a lender, we have some experience in the systems and controls that they have. In our opinion, the system is designed to do two things, keep innovation and competition away from the mainstream institutions. Secondly it is there to force you to pay for the services of professional people, some of course used to work for the FCA. They will (for a fee) guide you through the application process. Sort of a protection fee. The business that we started 9 years ago would not be able to launch today.

Maybe though we are wrong, maybe we just have the wrong end of the stick. OK, we’ve been wrong before, so let’s examine the logic tree here.

When applying for FCA lending permission. You must submit a business plan, despite lending your own money, the FCA wants to know how it all works – Fine! This is the stage at which we withdrew ours, the process is very costly. For example, one of our products was a type of loan where borrowers came to us and we would half their rate.

The response from the FCA was “how does that work?”

Well, people bring their loan to us and we half the rate.

Then came numerous pointless questions that ground the life out of us until we just gave in.

The FCA will argue then that the business plan needs to be thoroughly examined to ensure customer safety blah blah blah. Which is a fair point, but then the obvious question is (which is the real point of this article)  – how did Provident Credit come so close to collapse and come under investigation if the business plan was examined?

Options for The FCA To Respond With

As far as we know the FCA can only respond in one of three ways to the question “how did Provident come close to collapse and come under investigation if the business plan was examined?”.

1) They didn't ask for a business plan, if this is the case then why do the rest of us? We did ask the FCA this, they didn't comment.

2) They could argue that the Provident ignored the business plan and started acting outside of the business plan that they gave the FCA to get their permissions. If that is the case then why, when the FCA became aware that they were acting outside of the business plan did the FCA not take action and get them to stop, or require them to submit another business plan?

Or they could argue

3) That Provident acted within their business plan – if that is the case then why are they under investigation for selling a product that the FCA gave a green light to?

Do you see how things aren’t starting to add up for the FCA here? “We need to check business plans to the extreme but they are nothing to do with us when they go wrong” – how does that work?

The only explanation we can come up with that fits is that the FCA don’t care about business plans, it’s a sham to look like they are doing something but in the end, it’s window dressing. Nobody has ever been prosecuted or sanctioned by the FCA for trading outside of a business plan as far as we know.

The real problem with this is that the bureaucracy of the FCA is keeping out innovative businesses from challenging the high prices of the stale old boys networks. The costs of business plans must and always will fall on the customer who will eventually pay for it in extra interest charges.

Just what is the point of the FCA requesting them if nobody actually takes any notice of them? It increases costs for customers and makes money for the legal types! The people who used to work at the FCA who now own compliance agencies? On a slightly different note, non-sarcastic of course. The projected FCA costs for professional costs went up from £16m in 16/17 to £40m in 17/18 – 150% increase in a year – get in there!

The FCA are quite literally taking money from the poor and giving it to compliance agencies – they just have lenders in the middle for the public blame. It’s an amazing scheme, perhaps there is a clever business plan somewhere.