‘Wales, the land that banks forgot’ Dr. Nicholas Ryder Professor in Financial Crime Department of Law UWE

Introduction The evolution of the consumer credit market Convenient and affordable credit Some statistical data Irresponsible lending Predatory lending Findings and Conclusions Bibliography

Evolution of the consumer credit market Era of legislative deregulation (1980s and 1990s) Consumer credit market grew at an unparalleled velocity UK has the largest market share of the EU consumer credit market (10%) Rapid expansion of sub-prime lenders There is a ‘dark side’ to convenient credit

Convenient and Affordable Credit Convenient Credit –‘credit that is granted by the creditor with little or no reference to the credit worthiness of the debtor’ (Ryder, 2012) Affordable Credit –access to loans that are simple and transparent; –sympathetic lenders; –simple loan application procedures; –small loans over a short period of time and –affordable repayments

Convenient Credit Access to the credit market has dramatically altered Convenient access? –Internet –Interactive television sets –Financial institutions –Pay day lenders Individuals and communities: –higher credit charges, –limited access to financial products and services, –lack of security, –child poverty, and –unemployment

Some statistical data People in the UK owe £1.463tn, The average debt per household –was £55,384, The average debt per adult is £28,968,Banks and building societies wrote off £3.31 bn of loans, Interest repayments on personal debt would be £55.6bn, That’s an average of £152m per day, average consumer credit borrowing was £3,342 per UK adult, Credit card debt in was £61.0bn.

Some statistical data (Wales) Consumer Focus Wales 47% of adults in Wales have at least one credit agreement 10% have four or more credit commitments The average outstanding balance for those with debt was £3,390 Consumer Focus Wales 21% use credit to pay for everyday expenses 13% use credit to pay household bills 35% sometimes struggle pay bills and credit commitments; 17% face a constant struggle or facing real financial problems

Some statistical data (Wales) Consumer Focus Wales Younger people and some of the most vulnerable 19 % with active credit commitments have fallen behind with payments Consumer Focus Wales 18 % of adults have fallen behind with payments for bills/and/or credit repayments in the last 12 months; 5% have fallen behind with both

Irresponsible Lending “a business practice that it would consider deceitful, oppressive, unfair and improper for the purposes of revoking a consumer credit licence” (Ryder, 2012)

Irresponsible Lending Increasing credit card and overdraft limits without the customers consent not requesting proof of income when determining the level of credit to be offered providing loans and credit cards to the unemployed speed and simplicity of credit applications High credit limits Incentives to use a particular brand of credit card

Predatory Lending “engaging in deception or fraud, manipulating the borrower through aggressive sales tactics, or taking unfair advantage of a borrower’s lack of understanding about loan terms (US Department of Treasury, 2000).

Predatory Lending Intentionally targeting vulnerable individuals extract excessive fees and costs from the borrower aggressive marketing practices, High pressure sales tactics, Harsh loan terms, such as prepayment penalties, and This inhibit a borrower’s ability to go elsewhere for credit.

Findings and Recommendations Bank Closures Corporate restructuring by UK banks since the 1990s Welsh MPs debate House of Commons 2012 "The government does not intervene as a matter of principle” (Chloe Smith, HM Treasury Minister) Bank Closures Campaign for Community Banking –800 communities have lost all local banking presence –1500 communities are at risk –There has been a 46% reduction in the number branch network (2014) Closures are inevitable with electronic/mobile banking

Findings and Recommendations Credit Unions Inadequacy of Westminster model since 1998 Overreliance on state funding Political and public misconception Devolution and the development of a ‘hybrid model’ Credit Unions Record growth of credit union members since 1998 Similar models adopted in Wales and Scotland Joined up approach Redress imbalance caused by political and public misconception

Findings and Recommendations Irresponsible Lending Inadequate regulation by the Office of Fair Trading Weak financial penalties imposed by the FSA as part of its credible deterrence policy Unethical banking/lending practices? Impact of FCA from April 2014 Predatory Lending Effective regulation in the United States Breaches of criminal law? Fraud?

Conclusions Continuing record levels of consumer debt, Evidence of irresponsible lending practices, the imposition of extortionate interest rates, Branch closures as part of corporate restructuring.

Conclusions Development of community banks Development of credit unions Financial literacy – unfulfilled promises?

Bibliography Campaign for Community Banking ‘Branch Network Reduction: 2014 Report’ (2014) Consumer Focus Wales ‘Consumer Finances in Wales: Debt and credit use’ (August 2010) The Money Charity ‘The money statistics January 2015’ (February 20105) Ryder, N. ‘Predatory lending and white collar crime: a critical reflection’ (2014) International Company and Commercial Law Review, 25(9), , with Broomfield, K. Ryder, N. ‘The credit crunch – the right time for credit unions to strike?’, (2009) Legal Studies 29(1) Ryder, N. ‘The funding of credit unions – where has all the money gone?’, (2008) Journal of Social Welfare Family 30(3), , with Chambers, C.

Bibliography Ryder, N. ‘Credit union legislative frameworks in the United States of America and the United Kingdom – a flexible friend or a step towards the dark side?’, (2008) The Journal of Consumer Policy, 31(2), Ryder, N. The Financial Crisis and White Collar Crime: The Perfect Storm? (Edward Elgar, 2014) Ryder, N. Commercial Law: Principles and Policy (Cambridge University Press, 2012, 656 pp) with Griffiths, M and Singh, L.