Growth Street CEO ‘sceptical’ of firms which reject APRs

Growth Street CEO 'sceptical' of firms which reject APRs




James Sherwin Smith, CEO at Growth Street, has backed the Competition & Markets Association (CMA) proposals in its retail banking market investigation to increase competition in the SME banking sector.

In an exclusive interview with Bridging & Commercial, James responded to criticism the CMA has received over its proposals revealed in May. 

Proposals included increasing the transparency of the cost of lending for SMEs, where the CMA provisionally decided to require all lenders that provide unsecured loans and overdrafts to SMEs to display a representative annual percentage rate (APR) on their websites.

Growth Street campaigned for clearer APRs to be published and James felt most of the criticism it had seen had not been substantial.

“Because [APRs include] interest and fees, it doesn’t matter if you are charging 0% interest and all fees or vice versa - APR works. 

“The last time [I saw] people fighting against APR was from the high-cost short-term credit industry, in particular the payday lending sector, where they were going out of their way to rubbish [APRs] as a metric that was inappropriate. 

“We can see how that played out.”

James added that he felt most of the criticism over APRs had come from those who had a vested interest in not seeing APRs adopted. 

“…I’m generally very sceptical of people pushing back against [APRs] because it works for a variety of different types of finance.

“APR is still seen as the best metric and I would argue that there is no point trying to deviate from that – it is well understood, it’s commonly used and, from our perspective, it’s the best foot forward to get much needed transparency into the cost of finance.”

The SME lending arena is not the only market which has seen conflict over publishing APRs. The bridging finance industry has also seen clashes over whether it needs to be more transparent over fees.

“What happens at the moment is that you see the typical tricks of promoting headline rates, but when you really dig in, you find there are a lot more terms and conditions that carry further fees,” James added.

“The feedback we’ve had from prospective customers is that they think they’re paying a lot less than they really are. We have to challenge them to reconsider how much they are actually paying in interest and fees to get a sense of what the APR might be.”

The CMA is expected to publish its full report on competition in the retail banking market with proposals on ways to improve competition in a few weeks. 

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