A look ahead at 2024

Published 09 January 2024

2023 was a busy year for the consumer credit sector and the CCTA. It saw the introduction of the FCA’s Consumer Duty, new research into the impact of illegal lending and further engagement with our key stakeholders- the FCA, the FOS and HM Treasury on a range of issues. Here we explore some of the developments we expect in 2024. Proposed changes at the FOS The FOS and its current consultation on their plans and budget will be one of our first priorities for the year at the CCTA. These proposals suggest a reduction in the case fee and levy which would be a welcome change for the sector. The FOS is also seeking views on whether Claims Management Companies should pay a case fee for accessing the FOS system. This is a proposal that we have pushed for in recent times. That one side of a disagreement should carry all the costs in a fight between two commercial organisations is unjust. It also allows for bad behaviour and poor quality complaints without consequences. That is why we will be pushing the Ombudsman to go ahead with the proposals. Will BNPL regulation finally arrive? Regulation of the Buy-now Pay-later (BMPL) sector has been expected for some time. We know that regulation is on the way. With the reported use of BNPL now so high it means that this must be inevitable. The unknowns are going to be the type of regulation and the timing. Last summer the Government suggested that BNPL might receive lighter regulation. That did not go down with consumers or other lenders wanting a level playing field. Reform of the Consumer Credit Act The long-awaited review of the Consumer Credit Act (CCA) is also expected. It is likely that parts of the Act will now become part of the FCA Handbook to be more flexible moving forward. We will be working on behalf of members to simplify some of the outdated parts of the Act for firms and consumers alike.  There will be an election…at some point We also know a General Election is coming this year. Sunak is hinting that it will likely be in the latter half of 2024. We will be engaging with politicians across the political spectrum ahead of the election, including Labour’s shadow Treasury team to brief them on the sector. It is crucial that any new government – Conservative, Labour or some coalition – understands the importance of credit for UK families and businesses. The Consumer Duty isn’t done July 2023 was the implementation deadline for the Consumer Duty, but that was just the start. The next steps for the coming year are likely to focus on governance and Management Information. It will be about how you are evidencing that you are doing the right thing for the consumer. The regulator is likely to explore several issues through the prism of the Duty. We have already seen this with value for money around bank savings rates and investment fees. A likely …

Borrowing and spending at Christmas

Published 15 December 2023

At this time of year, there are always stories about how people plan to pay for Christmas. Costs can quickly add up between presents, family expectations, extra travel, and hosting. Combined with the cost-of-living crisis currently facing many, it can be an expensive time of year. This year, different organisations have researched to explore our Christmas spending. New data from the Money and Pensions Service (MaPS) shows that one in four (26%) will likely borrow or use credit for upcoming holidays like Christmas. Consumers were planning to use different methods of borrowing, with credit cards being the most popular at 52%. The FCA also polled the public about their Christmas spending plans. They found that many parents felt pressured to spend, with over a quarter (29%) of parents with young children having already borrowed or intending to do so. The regulator has said that this pressure may mean more individuals are susceptible to loan fee fraud (when a customer pays for a loan they never receive). Therefore, the FCA runs its loan-free fraud campaign, which you can learn more about here. This all raises important questions about borrowing and lending responsibly, but also access to credit. Is it right to borrow? Can the applicant afford it? Will they be tempted to look elsewhere if they cannot access regulated credit? Will they become a victim of fraud? Firstly, no one should feel pressured to spend. Taking on more borrowing than manageable is not a good idea. Lenders must ensure any borrowing is suitable as part of their lending assessment. When individuals do feel pressure, they might exhaust the options open to them. We know, for instance, that consumers of alternative credit do not have many lines of credit available. This is where the likes of the FCA’s loan free fraud campaign and the Illegal Money Lending Team’s Stop loan sharks message become more critical. It is essential that Christmas borrowing does not push people into the hands of fraudsters or loan sharks. Illegal lenders will use this time of year to prey on the vulnerable. Consumers should always use a regulated firm to borrow so they are protected if anything goes wrong. This can be checked on the FCA’s register, and if someone suspects they have been a loan shark victim, this can be reported here. This returns us to the central argument about access to credit. We know that a lot of borrowing is cyclical. People take credit to cover significant life events and pay off in the coming months. It is not uncommon to borrow for a holiday like Christmas, but it needs to be manageable and not push people into the unregulated world. We need to remember that without access, the demand remains. There needs to be a varied credit market to serve the needs of different consumers to help them manage their finances.

Changes at the FOS

Published 08 December 2023

Earlier this week, the Financial Ombudsman Service (FOS) published its Plans and Budget consultation for 2024/25. While these are first steps, we believe that they are heading in the right direction.  The consultation details changes to the organisation’s funding model, including a £100 reduction in the case fee, a decrease in levy payments and plans to consult on charging professional representatives, which include Claims Management Companies (CMCs), to bring cases to the FOS.  We have been working on reform of the organisation and the complaints system for some time. Members will know that we have engaged with the FOS from the board level to the frontline teams interacting with firms daily, so it is good to see some steps in the right direction.   Firstly, it is good news that the proposed case fee is set to drop as this affects all firms. Businesses have endured year-on-year increases in recent times. We have often discussed the burden the case fee places on firms, particularly for small and medium-sized businesses, so it is promising that the FOS wants to try to bring this down.  It is also promising that the Ombudsman will move forward with plans to charge CMCs to access its service. CMCs have long been a feature of the alternative lending market.  We have raised the poor practices shown by some CMCs again with the FOS and those responsible for regulating the sector. Firms see many poor cases brought by CMCs due to the lack of incentive to submit a higher quality claim when they bear none of the financial cost.  Lenders have struggled with poor practices, including receiving a high volume of cases where they have no record of the customer ever taking a loan. There have been concerns that customers weren’t even aware that CMCs were bringing cases in their name, as the proper authority has not been obtained. This put a significant strain on many businesses so it is good to see that they will now be charged a fee. Hopefully, this will encourage them to bring forward only legitimate cases.   Firms will still pay a case fee in these circumstances, but CMCs will also be charged if these proposals move ahead. FOS are seeking views on the amount as part of the consultation. These changes could be significant, but they are still at the consultation stage. Some of the proposals would need secondary legislation to be laid before Parliament by HM Treasury before they could be implemented. Still, it is promising to see the start of that process with some publications from the Government in recent days.  As you would expect, we will continue to engage with the FOS on its plans. Our CEO, Jason Wassell, will attend the FOS Industry Steering Group next week to discuss these proposals in more detail. And the association will also submit a formal consultation response.   We encourage members to do the same or share their views. If we can demonstrate how these changes would help firms and better support those customers …

Level playing field in consumer credit?

Published 03 December 2023

BNPL and Big Tech shake things up Unsurprisingly, consumer credit regulation plays an essential part in the lending market. A level playing field in consumer credit is a crucial principle. Firms of different sizes and formats and providing various products need access to the market. We can see some areas where we may come off track with the current discussions about regulating Buy Now Pay Later (BNPL) and Big Tech entering into financial services. These developments open up some great discussions about how consumer credit is regulated. They pose some challenges for the Financial Conduct Authority (FCA). More BNPL firms come into FCA regulation, but BNPL is still unregulated This issue came back to the front of my mind with the end of a set of temporary permissions that some firms had to provide FCA-regulated products while sitting out the regulatory regime. Those firms with regulated credit products must now have the correct FCA permissions. It has brought in some BNPL firms like Klarna into the FCA orbit. The vital point is that the BNPL product is still not regulated by the FCA. It is interesting to see what is happening, made more difficult by rumour and speculation. Regulation of BNPL continues to be a hazy area. There have always been regulated firms providing the unregulated BNPL product, including some CCTA members. We need clarity and want a level playing field for all consumer credit firms. Some firms, though far fewer, still say that BNPL is not a credit product and should continue to be a non-regulated product. Did the Government wobble on regulation? Our last City Minister, Andrew Griffith, was thought to have been floating a lighter regime for BNPL, and indeed, we had heard him say directly that this was a cheap form of accessible credit. I took from what we heard that this was a way of filling some of the growing gap between supply and demand. However, that raises questions about that level playing field in consumer credit. The flag was raised, and many organisations rushed to join the battle. It is also fair to say that this pause in regulation raised considerable concerns amongst the debt charities. There were joint letters of complaint and plenty of words on why BNPL regulation should be pushed on. It will be interesting to see whether the new Minister is sceptical or returns to the more traditional view. Our long-held position is that we should try to keep the regulatory burden to a minimum so we can certainly understand those promoting new products looking to develop their case for exception. However, we need an even approach. Big Tech enters That theme continues into the FCA’s interest in Big Tech potentially entering into financial services. There are some big questions about whether those firms can create a market advantage from the large amounts of data they hold. A debate that we know will roll into 2024 and beyond. We know that data is an integral part of the market. We …

FCA regulatory update
Key themes from Martha Stokes’ speech to the 2023 CCTA Conference

Published 27 November 2023

Access to affordable credit allows people to manage their money and helps them cope in tough times. It requires a well-functioning market where customers are treated fairly, supported if they get into financial difficulty and are equipped with the information they need to make good decisions. Ensuring the regulatory framework supports these objectives is key for the FCA. REVIEW OF THE CONSUMER CREDIT ACT In July, the Government confirmed its intention to overhaul the Consumer Credit Act – moving much of the Act into the more agile regulatory framework of the FCA rulebook. This provides opportunity for a more coherent, flexible, less fragmented credit regime – a regime that can facilitate innovation as markets evolve. The FCA will be working with Government through the reform process to ensure consumer credit regulation supports a well-functioning and competitive market, whilst maintaining the appropriate degree of consumer protection. EMBEDDING OF THE CONSUMER DUTY Another significant regulatory change is the Consumer Duty which came into effect at the end of July. The Duty fundamentally changes expectations of the financial services industry by setting higher and clearer standards of consumer protection. It asks firms to deliver good consumer outcomes at every stage, placing consumers’ interests at the heart of businesses. The Duty will enable the regulator and markets to tackle future challenges; to act quicker, without consulting on new rules each time a new problem or opportunity is identified. As markets evolve and new benefits and risks to consumers emerge, the Duty requires firms to act to deliver good outcomes and protect customers from foreseeable harm. Examples of good practice are already being seen, and as firms continue to embed the Duty, the focus should be on those areas that will have the biggest impact on customers. Firms should be considering: is the product or service designed to deliver good outcomes for consumers? what is the target market for this product and are our communications clear to consumers? is there any sludge in the customer journey which interrupts or hinders good outcomes? Are there any barriers to complaints, for example, or unreasonable, punitive extra costs? Firms can expect to be asked to demonstrate how their business model and culture deliver good customer outcomes. The Duty fundamentally changes expectations of the financial services industry by setting higher and clearer standards of consumer protection. Complying with Consumer Duty is about adapting business to meet current and future needs. The rising cost of living, for example, is impacting budgets of UK consumers, putting pressure on their disposable incomes, and pushing more into financial difficulty. People who want to borrow, or have borrowed, will in many cases find it harder to pay off their debts. More customers will become vulnerable. The FCA is therefore asking firms to do more to encourage customers to speak up when they are in financial difficulty, playing a crucial role in engaging these consumers, for example by signposting debt advice services, offering tailored solutions and making sure additional charges are fair. Getting good outcomes …

CCTA Academy
Online learning & development platform launched

Published 27 November 2023

Some of you will recall that, almost a year ago, we carried out a member survey to see how we could further improve our services as your trade association. Over 80% of respondents wanted the CCTA to enhance our learning and development offering. That has led to the launch of the CCTA Academy. As many of you will be aware, the CCTA has been working on introducing our new online learning and development portal, CCTA Academy. Those who attended our annual conference in Manchester in September will have heard me speak about the impending launch of the portal. I am pleased to announce that we have successfully launched CCTA Academy. Some of you could not attend the conference, so I wanted to take this opportunity to tell all our members about the Academy, its features and benefits. Members who register for the Academy will enjoy online compliance training for both staff and managers. The training covers industry-specific modules relevant to our membership, for example, tailored courses such as motor finance, retail finance, pawnbroking, high-cost, short-term credit, home-collected credit, personal loans and guarantor loans. In addition to a tailored course relevant to your industry, the compliance training includes modules on critical legal and regulatory topics. These modules include vulnerable customers, complaints handling, conflict of interests, financial promotions, anti-money laundering, anti-bribery, SM&CR conduct rules, whistleblowing and the Consumer Duty. Whilst these courses are relevant to all staff members, manager training courses also include advanced GDPR, SM&CR for managers and the Consumer Duty for managers. The CCTA Academy portal also has further features and benefits for members to utilise, and I wanted to cover some of those here: CPD ACCREDITATION All our courses are Continuing Professional Development (CPD) accredited. Learners earn CPD points for completing each module. Once completed, learners take an exam, which they must pass at a minimum rate of 80%. Upon completing each exam, the learner gains the relevant CPD points applicable to the module and a downloadable certificate of completion. Members are even able to add external CPD points earned outside the Academy. LIVE LEARNING SESSIONS From time to time throughout the year, CCTA (and its associate members) will carry out live learning sessions on key, trending industry and regulatory topics. All staff and managers signed up can attend these live learning sessions free of charge. These additional sessions help ensure ongoing learning and development opportunities for all registered learners. ADD YOUR COURSES AND CONTENT The portal includes a feature for firms to add your basic courses or content. Whether it is a document, video, audio or PowerPoint file, you can make these available to your staff by adding them to the portal library. ADD YOUR COMPANY POLICIES AND PROCEDURES The portal can also be part of your firm’s onboarding process for new starters and managing existing employees. You can add your company policies and procedures for staff to ‘read and accept’, recording their adherence to the policies and procedures. Over 80% of respondents wanted the CCTA to enhance …

Changing tides?
Cost of living and borrowers in financial difficulty

Published 27 November 2023

Undoubtedly, the Financial Conduct Authority (FCA) is taking the cost of living very seriously. To a certain extent, this is a continuation of a project that emerged from the COVID-19 pandemic. While there has been some good news around the fall in inflation and wage growth, a group of families will find themselves in a difficult position. The cost of living has been the highest public agenda item at times and then fallen away as other issues emerged and inflation started to fall. As winter approaches and energy prices become a more significant factor, we will see pressure increase again, though hopefully, inflation will be less of a feature. There may be a debate about the scale or direction of this issue, but it has been of crucial importance to the FCA. It is a key element within their work on Borrowers in Financial Difficulty. From our discussions with the FCA and our review of their communications, we can see that they want lenders to be more proactive. They push for more customer contact and expect forbearance options tailored to individuals. OUR STARTING DEFINITIONS Returning to the basics, below are the definitions the FCA use for the cost of living and borrowers in financial difficulty. Cost of living: The amount of money a person or household needs to spend on necessities, such as food, housing, and transportation. Inflation has been part of this story. Borrowers in financial difficulty: People having trouble making their loan payments. The idea of borrowers in financial difficulty, as a group, has been around for as long as lending has taken place. It has never been in firms’ interest to lend to those without a chance of paying back. DIFFERENT PHASES However, it was around the pandemic that the FCA used this term more, and it has since then become a standard part of our vocabulary. This FCA focus has continued as we moved into a phase of increasing inflation. There were three critical areas of increase: energy, food, and transport costs. Within those are pressures from the war in Ukraine and the global supply chain crisis. There is also debate over the impact of Brexit. In 2022, we saw this reflected in an inflation rate that reached 11% by the year’s close. However, in discussions with our members, we know that financial position is not as simple as sometimes suggested in newspaper articles. The red flags that we would expect to see have not appeared. (The FCA) want lenders to be more proactive. They push for more customer contact and expect forbearance options tailors to individuals. That may be because we have also seen wages increase. Pay rises have run way ahead of inflation at specific points, which means some families have found themselves in a better position. The issue of inflation may be falling away as we progress to a new phase. However, as we move into winter high energy prices are likely to come to the fore again putting some under strain. WHAT …

All hands on deck
Working with the Financial Ombudsman Service

Published 27 November 2023

At the Financial Ombudsman Service, we’ve been working hard to deliver faster results for complainants and firms without compromising on the quality of our decisions. We are building the service that our customers need and rightly expect, with the flexibility and capacity to deal with the changing landscape in financial services and beyond. Comparing the first half of 2023-24 to the first half of the previous year, we’ve reduced the average number of months we took to resolve cases from 4.8 to 3.2 months; we resolved 56% of cases in three months, up from 30%; and we resolved 82% of cases in six months, up from 55%. We want to do better, and for that we need the cooperation and support of firms. We recently wrote to firms explaining how they should work with us to resolve complaints. Some of the key points identified for building an effective working relationship with our Service include: Sharing early insight with us on complaint volumes – particularly unexpected spikes – helps us ensure the right cases are resolved at a firm’s front-end, and that only the cases that need to come to us do so. Providing files and information to us in a timely manner – means we can get cases resolved quicker and more efficiently. We are now allocating and progressing complaints much more quickly than was the case, but we can only do that when we get a firm’s side of the story as early as possible in the process. Helping us to understand a firm’s perspective – in particular, firms being prepared to ‘show their working’, explain the decisions they’ve made and provide supporting evidence so that we can properly take that into account. Learning from decisions that go against firms – firms might not agree with our decisions and there are processes to formally challenge them where appropriate. But where our decisions stand, firms need to apply the lessons to their business and the way they handle complaints – as required byDISP rule 1.3.2A in the FCA’s Handbook. Engaging effectively with professional representatives –including claims management companies. Our experience is that where firms take an adversarial approach to representatives, this just makes things worse – leading to more complaints, higher case fees and higher uphold rates. We understand the concerns that firms raise with us about professional representatives, and we’ve sent them a separate letter setting out our expectations of them when they refer complaints to us. We work with representatives to ensure that they are bringing only the right complaints in the right way – for example, we’ve prevented thousands of cases from coming to us and incurring charges by making sure that representatives have worked with the relevant financial services firm first. Where concerns or issues remain, we share insights and information with representatives’ regulators. Speaking of regulators, we have done a lot of work with the FCA, along with industry and other stakeholders, to get ready for the Consumer Duty. Like firms, we are ultimately a …

The final countdown
What do the next twelve months have in store for UK politics?

Published 27 November 2023

Everyone knows the saying “a week is a long time in politics” so a year could be considered an eternity. However, I did want to talk about the next twelve months as we head towards the general election and a possible change in government. I think it’s fair to say that the last few years have shown anything is possible in UK politics. Things seem to be very fast moving now, even between starting and finishing this article another government reshuffle took place! SO WHERE ARE WE NOW? Sunak has been in post as Prime Minister for just over a year now. It seems that the strategy was to distance himself from both the “Covid” years under Johnson and the economic disasters under Truss. The Prime Minister has focused in on six key pledges- such as bringing down inflation and reducing NHS waiting lists. Some may be in his gift, but he is running out of time to deliver on others. The focus has been about steadying the ship, appealing to the more centrist Conservative voters and demonstrating that they can continue to be the natural party of government, despite their recent setbacks. The reshuffle also shows a move back towards centre ground with the return of David Cameron and promotion for some of his previous Special Advisors. It also means that we have a new Economic Secretary, the Minister responsible for financial services regulation, in Bim Afolami MP. IS AN ELECTION LIKELY? The Government must call the next general election by the 28th January 2025. Official notice must be given and the Prime Minister is likely to want to avoid the Christmas season, so best guess is that it is likely to take place next autumn, unless his hand is forced into calling it sooner. If I were Sunak, I would be waiting till as late as possible to give myself more time to demonstrate a record of action. Expect opposition parties to keep pushing the rhetoric of time being up on the Conservatives in government and calling for an early election at every opportunity. Sunak will also need to keep a close eye on the right of his party, likely to be disgruntled by the recent sacking of Suella Braverman and new Ministerial appointees. He needs to hold the party together. WHAT’S HAPPENING WITH LABOUR? It is widely reported that Labour are now around 20 points ahead of the Tories in the election polls. It is looking ever more likely that they will form the next government, which can be a double-edged sword for current leader Keir Starmer. There is a view that all Starmer needs to do is make it to the next election and the job of Prime Minister will be his. He is riding high from a successful party conference, where attendance was up. In fact, the corporate events sold out well in advance, indicating where the business community are focusing their lobbying activity. This is a stark difference to the Tories that had to …

Combating economic crime
Giving fraud prevention the credit it deserves

Published 27 November 2023

The need to tackle fraud remains critical. As UK Finance reports that consumers have lost over half a billion pounds to fraud in the first half of 2023, it has never been more important to stop criminals in their tracks – at the earliest opportunity. While doorstepping residents remains a favoured tactic for opportunistic criminals, the face of modern fraud is online and digital – exploiting vulnerabilities through fake emails and websites, and bogus social media messages and SMS. This often makes it even more difficult to detect and report fraud. However, what we are saying is nothing new. We all know we want to combat fraud, but how do we do it? At Cifas, we have spent the last 35 years helping our 700-strong membership save billions of pounds. The time is ripe for the credit industry to work with other industries and the public to take data-sharing to the next level, and turn the tide on modern-day fraud and financial crime. Our not-for-profit organisation was initiated by the consumer credit industry, set-up as a vehicle to exchange fraud data in the analogue age. Over the years, we have developed and expanded our services to meet the changing needs of the credit industry and wider sectors, which each benefit from sharing their fraud risk data and collective expertise. Further evolving this platform for the digital era is a key priority for us, and the time is ripe for the credit industry to work with other industries and the public to take data-sharing to the next level, and turn the tide on modern-day fraud and financial crime. Why now? Because the opportunity is clear. The UK Government Economic Crime Data Strategy, announced in the Economic Crime Plan, presents a once-in-a-generation chance to create the infrastructure and framework to bring about a step-change in prevention and detection. Done right, this strategy could unlock the fraud prevention potential of a crime costing the UK upwards of £200 billion per annum. That figure alone underlines the significance of the challenge, and why a collective approach is needed to unlock the power of data and reduce economic crime. The conditions are right for this next step forward. Firstly, while the data landscape across the UK’s anti-economic crime community is fragmented, considerable strides have been made in data-networking and analytical capabilities, which offer a new-found ability to bridge this disparate landscape. Secondly, the current Data Protection and Digital Information Bill, if passed into law, provides further legal clarity around the sharing of data for the purposes of preventing or detecting crime. Thirdly, the UK government’s Economic Crime Plan 2, launched in March 2023, rightly recognises the value of data in the fight against economic crime and commits to creating a public-private National Economic Crime Data Strategy to “enhance the exploitation of available data across the ecosystem to better prevent, detect, and pursue economic crime”. If correctly framed, the Data Strategy has the potential to revolutionise the response to economic crime in the UK and provide …

Who guards the guardians?
Tackling scammers impersonating the regulator

Published 27 November 2023

The Financial conduct Authority (FCA) has a pivotal role when it comes to the granting of consumer credit to individuals. Principally it is an organisation which regulates lenders, their agreements and everything to do with credit. Its tentacles are spread far and wide. But first and foremost its regulations focus on the protection of the hapless “customer”, or individuals, to whom credit is granted. The new Consumer Duty, (see “The new Consumer Duty: Why all the fuss?”) is the latest manifestation of this. Anyone involved with credit lending will be familiar the FCA’s Handbook which details (amongst other topics) High Level Standards; Regulatory Processes; Redress and a plethora of guides and guidance. Not least amongst these is the “Consumer Credit Sourcebook” which is the specialist sourcebook for credit related activities. So we are no doubt all alarmed to learn that the FCA is under attack from scammers who are impersonating the Authority. This is perhaps no surprise when one considers that last year it was reported that in the UK a staggering 41 million people were targeted by bogus calls, texts and emails. According to the bank industry group, UK Finance, this equates to £2,300 per minute or £1.2 billion lost to fraud. In a report from the BBC (30th August 2023) “Thousands of Scammers Impersonate Finance Watchdog”, it appears that the regulator has been subject to a huge number of cheats pretending to be the regulator. These fraudsters ask individuals for their financial details such as their bank accounts particulars, including PINS and passwords. The incentive to pass on this information is that the individual will receive compensation for some fictitious calumny committed by a regulated credit provider. The bank details are needed, of course, to facilitate payment of the fictitious compensation. The FCA has given sage advice should anyone be contacted offering compensation by an organisation claiming to be with Authority, including: The FCA will never contact people for their bank details Concerned individuals can contact the Authority by phone If someone receives a call, text or email claiming to be from the Authority suggesting that they are entitled to compensation then if called they should hang up the phone or ignore any other type of communication Often tell-tale signs of impersonation include a text or email containing poor spelling or grammar. Presumably, the more savvy and alert consumer will be aware of this. Perhaps the greatest protection will come once the UK introduces a ban on the cold calling of all consumer and financial service products. The government has said that such a blanket ban on cold calls will cover legitimate calls too. The precise products to be covered by the ban will be decided upon after consultation. An advertising campaign will be introduced to warn people about the risk of scams and a new fraud squad established with 500 staff, up from the current 120. At the risk of being cynical, devious fraudsters may still be able to find some way of navigating  around such obstacles, particularly if …

Understanding CP23/21
FCA Consultation Paper: Consumer Credit – Product Sales Data Reporting

Published 27 November 2023

In September 2023, the Financial Conduct Authority (FCA) published a consultation paper (“CP23/21”) entitled, “Consumer Credit – Product Sales Data Reporting”. WHAT? Under this consultation, the FCA “seeks views on our proposal to introduce three new Product Sales Data (PSD) returns into Chapter 16 of the Supervision manual (SUP 16).” It adds that the returns “will allow us to collect further data about the consumer credit market from providers of consumer credit products”. The three new returns are: Sales PSD, Performance PSD, Back book PSD. The consultation consists of 40 pages of commentary, and 80 pages of draft handbook text. The proposals represent a sea change in the FCA’s approach to data, from mainly collecting aggregated data, to requiring firms to provide very detailed data relating to credit decisions (whether resulting in an agreement or not), the sales process, affordability assessments and in-life performance at an individual agreement level. The FCA intends that collecting such data will enable them to make, “quicker, bolder decisions”, support in their authorisation and supervisory activities and give them a greater understanding of, and ability to, monitor risks in the market and identify harms. WHO? The proposed new requirements will impact all lenders in respect of “relevant regulated consumer credit agreements”, if they have reported more than £500,000 either in outstanding balances at the end of the previous annual reporting period, and/or more than £500,000 in new advances. This is a fairly low threshold and by the FCA’s own estimate 749 lenders will be in scope of which 607 (81%) will be small firms. WHEN? Responses to the consultation paper were required by 15th November 2023, and the regulator proposes that the new requirements will apply from 1st January 2025. The proposals stipulate that reporting will be due within 20 business days of the end of the reporting period for ‘sales’, within 30 business days for ‘performance’, both to be reported on a quarterly basis, and that back book data will be required as a one-off submission, all via RegData. IMPACT? The FCA acknowledges that “there will be costs to firms in collecting and reporting the enhanced data to [the FCA]”. Throughout CP23/21, the FCA is keen to emphasise that the new rules are intended to be balanced between the FCA’s objectives and the burden on firms to comply with the data reporting; and a cost benefit analysis is included at Annex 1 of the consultation. The regulator anticipates the average cost to firms to implement the reporting to be between £80,000 and £138,000 as a one-off and an average ongoing cost of £2,000 annually (anticipated as up to £20,000 for large firms). Further, the FCA states that there should be a longer-term benefit to firms in the FCA shifting from ad-hoc information requests to scheduled operational reporting. Such a shift in approach is to be expected, particularly in light of the FCA’s focus on becoming “a data-led regulator”. However, firms, advisers and industry bodies are expressing significant concerns about the enormous volume of data …