Embracing the Spirit of the Law

Martin Hagerty, Castlight Financial’s Chairman, once defined company culture to me as “the things people do when they know they’re not being watched”.

I like that definition. Because it doesn’t just apply to companies. It applies to whole industries too.

We are living in a world which is increasingly regulated. And nowhere is that more apparent than in the banking and lending space. The regulation is to be welcomed. It’s fundamentally important that customers’ best interests are served at all times. But I’d like to think that all of us who are committed to the principles of safe lending and borrowing, would think beyond regulation. I’d hope we would all be observers of the spirit of the law, not observers of the letter of the law. I hope that we would always do the right thing – whether we’re being watched or not.

At Castlight, we have tried to embed that “spirit of the law” thinking not just into our company culture but into the building blocks of our technology.

Surpassing Standards

Our affordability products, the Affordability Passport and CaaS (Categorisation as a Service) for example allow lenders to far surpass regulatory recommendations. In the FCA Handbook, under MCOB 11.6 Responsible lending and financing there is detailed section on “The Assessment of affordability”. This section stipulates, amongst other things, that a lender:

must take full account of the income of the customer, net of income tax and national insurance; and, as a minimum the customer’s committed expenditure; and the basic essential expenditure and basic quality-of-living costs of the customer’s household

This is an industry requirement, designed to ensure that basic affordability checks are in place to protect the customer and safeguard them from taking on unaffordable lending.

What our affordability products do is take this principle of safeguarding infinitely further. We apply the spirit of the law and push it. We do more than calculate committed expenditure, essential expenditure and quality-of-living expenditure.

Powerful Technology

Our Affordability Passport technology uses powerful, open banking technology, to categorise a customer’s income and expenditure across any number of bank accounts into a range of over 150 categories, summarising non-discretionary costs and credit commitments and revealing a monthly disposable income. The Affordability Passport provides a comprehensive profile of the customer’s income and expenditure – right down to how much he spends on takeaway pizza each month or how much she spends on gym membership.

We have the world’s most sophisticated categorisation engine and we are committed to using it to create a safer financial world. The more categorisation we can give to a lender, the more accurately they can assess their customers’ true affordability and the safer everyone is.

The Banking Standards Board (BSB) has been established to promote high standards of behaviour and competence across UK banks and building societies. It is not a regulator or a trade association and it has no statutory powers. It sets out rather to “provide challenge, support and scrutiny for firms committed to rebuilding the sector’s reputation, and it will provide impartial and objective assessments of the industry’s progress.”

As Castlight Financial continues to partner with some of the UK’s most forward-thinking banks to deliver more affordability scrutiny than is required by the regulators, I am confident that when we’re not being watched, we are doing exactly what the BSB would want us to be doing.