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What Edinburgh Reforms? UK Fintech Startups Call for ‘Overdue’ Consumer Credit Action

One year after the Edinburgh Reforms – described in December 2022 as one of the biggest overhauls of financial regulation for more than three decades – UK startups have criticised ‘delayed progress’ to a consumer credit shakeup.

The Startup Coalition, formerly known as the Coalition for a Digital Economy (Coadec), is demanding bold action and ‘political leadership’ to reshape the landscape of consumer credit regulation. It says regulators have hindered best customer outcomes, failed to accommodate innovation and technology by delaying progress on changes and let down fintechs.

The Edinburgh Reforms outlined an ambitious vision for the UK to become a global financial powerhouse. Central to this vision was the need to modernise the Consumer Credit Act (CCA), which has underpinned lending in the UK for nearly five decades.

In the year since the launch of the Edinburgh reforms, the government claims to have already delivered 22 of the 31 reforms including legislation that will overhaul the UK’s regulation of prospectuses, the information available to investors when a firm raises capital and bringing forward secondary legislation to take advantage of the UK’s newfound regulatory freedoms since leaving the EU through the implementation of the Wholesale Markets Review reforms.

Economic Secretary to the Treasury, Bim Afolami, said: “Over the past year we’ve made significant strides towards creating an environment that supports economic growth, openness, and the wellbeing of savers.”

Coalition research

But the Startup Coalition, the policy voice for UK startups, says little progress has been made in the 12 months since, with a response to the consultation from earlier in the year “seemingly on ice”.

In a new report, Startup Coalition details how consumer credit regulations are letting down both consumers and fintechs, having failed to adapt to changing technologies, consumer demands and innovation in the market.

The study sheds light on consumer lending behaviours, knowledge of financial products, and opinions on the functioning of Credit Reference Agencies (CRAs) and the Financial Ombudsman Service (FOS). The findings indicate rising consumer debt and a lack of understanding about financial products and regulators.

Commenting on the report, Startup Coalition’s fintech lead Luke Kosky, said, “While the complexity of the consumer credit market has made progress slow we must not allow the scale of the challenge to jeopardise our ambition. Only a fully reformed credit market, with a repealed CCA, can handle innovation and protect consumers for the future.”

Coalition’s plans

The Startup Coalition has called for an ambitious but measured plan.

  1. Gradually, and systematically, phase out the CCA, starting with prescribed form, content and timing shifting to FCA rules.
  2. Create a Competitive CRA Sector, starting with the swift implementation of all CIMS remedies. Policymakers also need to support alternative data sources and challenger CRAs through the development of open finance.
  3. Reform the FOS, starting with the introduction of multi-track case categorisation to enable increased efficiency and funding reform, alongside the rapid introduction of a customer facing portal.
Damp squib

The Treasury Committee is also disappointed at the “limited impact” of the financial services reform programme.

Analysis by the Treasury Committee finds six of the actions marked as ‘delivered’ by the Government are not yet complete. A further six measures should not be considered as reforms as they relate to actions such as publishing a document or welcoming a consultation, the Committee says.

Harriett Baldwin, chair of the Treasury Committee said: “More than a decade after the financial crash and six years after the UK voted to leave the European Union, the Treasury was absolutely right to look at updating regulation of the financial services sector and identifying rules which needed to be reformed or removed to encourage growth in this important economic sector.

“We welcome many of the changes as logical and sensible measures. We do, though, question the validity of claims that welcoming consultations, establishing reviews or publishing documents should be considered reforms.

“The Edinburgh Reforms were given considerable fanfare last December but, 12 months on, the lack of progress or economic impact has left them feeling like a damp squib.”

Promising direction

However, in contrast, Karim Haji, global and UK head of financial services at KPMG, acknowledges progress in establishing a new regulatory framework following the Edinburgh Reforms. He suggests that while change may not be happening as quickly as some might hope, he argues against compromising the stability of the regulatory system.

“One year on from the launch of these reforms, we can certainly point to a promising direction of travel in establishing a new framework in which our regulators can do their job,” said Haji.

“While the Treasury Committee has highlighted that change is not happening quickly enough, part of the attractiveness of the UK is that our regulatory system is relatively stable and regulators consult widely on proposed changes.

“We shouldn’t lose the value of this for the sake of meeting artificial deadlines. But government, regulators and financial services sector need continue to devote resources and momentum needs to be increased to delivery positive change for the UK economy.



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