What’s on the Regulator’s mind?
When the FCA took over regulation of consumer credit from the Office of Fair Trading they made a number of pledges to review and ‘clean-up’ the consumer credit industry. In March the FCA published its annual business plan in which it sets out its focus for the coming year and here’s some of the key headlines.
Approved persons and individual accountability
The FCA expect that a firm’s approved persons are fully aware of their individual accountabilities and that they are able to demonstrate a good understanding for regulation and their firm’s regulatory framework. Firms with approved persons who are not able to meet these expectations will be subject to very close scrutiny from the FCA which might even result in an enforcement action being taking.
Remuneration and incentives
Aggressively rewarding the sale of consumer credit agreements is likely to encourage miss-selling. The FCA expect to see ‘Treating Customers Fairly’ at the heart of a firm’s remuneration and incentive schemes which should motivate staff to act only in a way that is customer centric. Training and competence should also reinforce the right selling behaviours. This focus should also be extended to the relationship between lenders, brokers and introducers.
All customer facing information regarding financial products and promotions must be very clear and unambiguous. This includes advertisements and sales support materials across all communication channels, including the internet and social media.
Firm’s must ensure that they take appropriate steps to assess the customer’s situation so that only suitable products are recommended. Repayments must be affordable for the customer and over a sensible time period. Good account must to taken for the customer’s other outgoings now and in the future.
Customers in financial difficulty
Firm’s who are seeking to recover debts must show more than reasonable forbearance with customers, particularly when the credit owed may have been unsuitable in the first place.
Debt advice and solutions
The FCA want to ensure that debt advice and solutions are easily available to customers who need them and that they are in the best interests of the customer.
The above is by no means exhaustive however it does give an indication of what the FCA are looking at. In short firms need to have a sustainable and appropriate business model which incorporates adequate systems and controls, all underpinned by a culture of ‘doing the right thing’ for customers.