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4/16/15 - Consumer Credit and the FCA Regime

The consumer-credit industry has recently been subject to significant regulatory changes and increased political scrutiny. In April 2014, the Financial Conduct Authority took over responsibility for regulating the sector from the Office of Fair Trading. As a result, firms are now subject to increased regulatory scrutiny around their business models, culture, and approach to vulnerable customers.

The FCA’s conduct rules for consumer-credit firms include specific requirements applicable to high-cost short-term lenders. Firms not subject to those requirements nonetheless need to comply with affordability rules, and their affordability assessments must consider the customer’s ability to make repayments over the whole life of the loan (above 12 months). The FCA is currently studying affordability across the credit sector — work that will likely indicate the approach the regulator will take more widely.

The FCA’s 2015/2016 Business Plan emphasized that delivering improved outcomes for consumers in the credit sector is one of the FCA’s top priorities. The FCA will focus on firms’ communication with consumers, affordability assessments, treatment of vulnerable customers, and provision of debt advice, among other areas. The FCA will also conduct thematic reviews, examining debt-collection practices and remuneration schemes, and will continue reviewing financial promotions.

Many firms in the sector are reviewing their business models to ensure that they treat customers fairly and incorporate effective governance and controls and a strong customer-centric culture.

How Promontory Can Help

Promontory has extensive experience in supporting firms and individuals — not only with authorisation applications, but in helping clients meet regulatory expectations and requirements for conduct, by developing enhanced product-governance procedures, improving management information, reviewing complaint-handling procedures, and advising on interaction with the Financial Ombudsman Service, among other areas of assistance.

Our professional team is a mix of former senior regulators with many years of collective regulatory experience and industry leaders with wide-ranging financial services expertise. Promontory’s comprehensive services help companies ensure compliance with, and understanding of, the new regulatory landscape and heightened regulatory requirements.

We have worked successfully with institutions facing these regulatory challenges, offering a wide range of support, including:

  • Reviewing authorisation applications, including regulatory business plans
  • Assisting with the development and design of an approach to handling affordability complaints
  • Assisting firms with product design
  • Providing face-to-face training to senior managers
  • Managing the relationship with a number of stakeholders, including the FCA and Financial Ombudsman Service
  • Reviewing firms’ compliance and risk architecture

For more information, please contact:

Stuart King
Managing Director, London
+44 207 997 3402.