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Committee reviews Loans Regulation
The regulation of loans is under review and a the finding of a House of Lords committee is expected this month.
The Financial Services Authority (FSA) is currently working to evolve it's current rules-based regulatory approach into one it calls principles-based. The current rules-based system is thought to be getting far too complicated, with new sections being continually added as lending methods and products evolve and change. The cost of complying with the regulations and the cost and effectiveness of policing them has been called into a question in the past, so a new system based on principles, which hopes to be much simpler to implement and govern is proposed.
However a number of trade bodies in the loans industry are questioning the cost of rolling out the new system and the lack of any cost/benefit review to prove it will be effective.
Other issues raised by industry commentators are that smaller companies, such as locally-based loan brokers will suffer, as they become fearful of flouting, what are set to become, more subjective regulations; some believe many small lenders will step back from providing payment protection products in order to step out of the FSA's regulatory remit.
The loans industry already operates under a wealth of comprehensive and sometimes confusing rules and regulations, especially as far as borrowers are concerned, so the sooner the regulatory environment becomes simpler, easier to enforce, whilst at the same time offering the protection borrowers need, the better.
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