Imagine trying to review a film if you had only watched the opening credits or some critical scenes had been edited out. How different would Titanic be if you didn't know about the iceberg? Back to the Future without Christopher Lloyd and the DeLorean? Bambi without the scene in which Bambi's mother dies? You could certainly watch the film and probably enjoy it, but you wouldn't understand the full story.
That was effectively what happened when the Financial Conduct Authority (FCA) recently released its first thematic review - an in-depth look at how high-cost short-term (HCSTC) providers collect debts and treat borrowers who experience financial difficulty.
The FCA's thematic review was wrongly reported by many as a review of payday lenders after a year of the new regulation. This was not the case. It was a study of a specific element of their service that was undertaken as a series of snapshots over the last year.
As you would expect with a young industry adjusting to a new set of regulations, what the FCA found was an evolving picture with clear improvement in standards, but with more work to do.
But that didn't stop reports that focused on early findings of poor behaviour by a small number of lenders, which read as though industry-wide non-compliance with the FCA's rules was and still is rife. The use of phrases like 'thuggish' behaviour is irresponsible and reinforces misguided views about lending practices.
In essence, these reports jumped straight from the opening scene to the closing credits and ignored everything in between.
It was also reported that lenders are not exercising forbearance. It would have been more accurate to say that the majority of problems were due to several former payday lenders who were not exercising forbearance.
50 Shades of Grey
Nor did the report clarify the different degrees of non-compliance. This is crucial as threatening and harassing customers in financial difficulty is very different to an IT error that led to a customer being inconvenienced for a short time. However both are classed as breaches of the rules.
A few good men
The truth (if you can handle it!) which was acknowledged by the FCA, is that this is an industry that looks vastly different in 2015 to the one that existed 12 months ago. Short-term lenders are on a clear path of improvement, and the FCA acknowledged that the lenders they reviewed are demonstrating a real commitment to change.
Gone with the wind
Much of the bad practice that the FCA uncovered during its historic review was due to lenders that no longer operate in the market. Any remaining lenders still using such practices will have no chance of gaining full FCA authorisation and therefore will not be allowed to continue trading.
This is an unpalatable truth for those that wish to believe short-term credit is inherently harmful and that lenders lack any moral fibre or responsibility.
After several years of consistent criticism and intense scrutiny, the FCA heard the industry's call for acknowledgement of good practice. The thematic review included examples of positive changes and treatment of customers. And rightly so - the industry has been scrutinised to a level that has never been seen before and has been transformed as a result.
This review was undoubtedly a valuable snapshot of evolving business practice as it shows significant progress has been made, but also highlights where further improvement is needed.
No firms have perfect systems but, it is undeniable that high cost short term lenders are on the right path and those that aren't prepared to invest and improve in order to put their customers first have now left the market.
However, the thematic review should have been much clearer about when non-compliance was identified and whether the firms responsible are still trading. Until we tackle the institutional misrepresentation of the industry it will be difficult for consumers to break free of out of date financial services and embrace new technology and new attitudes to financial management.