F&I Management & Training

The consumer credit market appears to have stabilised but remains down by almost £11 billion on last year, according to new figures published today by the Finance & Leasing Association (FLA).

The figures show that new business written by FLA members, who provide secured and unsecured loans, credit and store cards, and motor finance, fell by 17% in July 2009 compared with the same month in 2008.

The rate of contraction in new business is showing signs of stabilising. Overall, new consumer finance business in the three months to July was 16% lower than in the same period a year earlier. This is similar to the rates reported in May and June. But the FLA cautions that the pressures that led to shrinkage in the consumer credit market continue to pose a risk, not least the problem of access to affordable wholesale funding. The raft of proposed consumer regulation in the Consumer White Paper, published in July, could also affect the size of the market, warned Geraldine Kilkelly, Head of Research and Chief Economist:

"Our figures suggest that the rate at which consumer credit provided by our members is contracting has stabilised. But over the last year, FLA members provided £10.9 billion less than they provided in 2008. There is a risk that if the burden of new regulation drives credit providers out of the market, consumers will be faced with a limited choice of lenders. This could affect the rate of economic recovery."

The FLA figures show that the lack of affordable wholesale credit has made it very difficult for consumers to get a secured loan, with lending in this market down 83% in the last three months. Consumers continue to take advantage of finance deals in the high street, which has led instalment credit levels to grow by 4% over the same period.

Table 1: New business extracts, July 2009