As the UK and European
financial services industry braces for further regulatory changes,
leasing businesses should take a long-term view and prepare for
change, says Stephen Dawson
It is inescapably the case that the
regulation of financial services businesses in the UK continues to
become more intrusive, more complex and more expensive.
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It is beyond the scope of this article to cover
every piece of legislation (pending and in force), nor would it
make for pleasant reading, but we might start with the early
observation that companies engaged in leasing and hire
businesses – B2B or B2C – will only see more red tape, not
less.
Take, for example, the Consumer Credit Act
1974; while exemptions exist, we know that at its broadest this
covers credit (being loans, hire purchase or any other form of
financial accommodation) and consumer hire business.
The very definition of ‘individual’ includes
sole traders and small partnerships (of three of fewer partners),
and the complex list of available exemptions does not allow us to
exclude credit or hire arrangements with these kinds of customers
where the credit or hire is under £25,000.
If your asset finance or leasing business
operates in the small or medium ticket sector, this kind of
legislative intent is a very substantial and expensive issue.
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By GlobalDataAt the same time – and as we have watched the
partial disintegration of the financial services infra-structure on
a pan-European basis – we know that responsibility for financial
stability and regulation in the UK is set to change.
The principal change will see the abolition of
the FSA in its current form, together with the establishment of
three new regulatory bodies: the Financial Policy Committee (FPC),
the Prudential Regulation Authority (PRA) and the Financial Conduct
Authority (FCA).
These changes will affect the regulation of
financial services across the board, including lending that falls
within the current Consumer Credit Act 1974. Listen out for the
name ‘Financial Services Bill’; this enormously complicated piece
of legislation had its first reading in the House of Commons on 26
January 2012.
Currently it is with the House of Lords, and
the committee stage continues on 8 October, when further amendments
will be discussed. With proposed, though admittedly graduated,
implementation running from 2014 through to 2016, this is a subject
to keep a close eye on.
Another example of expensive ‘root and branch’
regulation is the Basel Accord, which was originally agreed in its
first incarnation in 1988 by the Basel Committee on Banking
Supervision. Now approaching its third incarnation, the Basel III
proposals are a long-term package of changes due to commence on 1
January 2013, with the transition period expected to run until
2021.
Essentially, businesses of all kinds engaged in
credit and hire/leasing – in the B2B and B2C sectors – must take a
medium to long-term view of financial services regulation and to
invest in robust internal compliance measures.
Indeed, you are encouraged to join in with your
competitors and your trade body and take an active role in shaping
the future of your sector.
Stephen Dawson is a partner with UK law
firm Shoosmiths
