FCA’s Strategy: Promises of Proportionality

In late March, the FCA launched its new five-year strategy until 2030. Much of the focus has been on the need to help deliver growth and contribute to the UK economy, but the regulator has also outlined four main themes for its future areas of work. It has committed to becoming a smarter regulator, supporting growth, protecting consumers, and tackling financial crime.

Focusing on the first theme, the FCA has said that being a smarter regulator means being predictable, purposeful and proportionate. It aims to improve its internal processes and embrace technology to work more efficiently with regulated firms.

This includes a commitment to continually review the information it requests from firms, particularly data. The FCA notes in its strategy that data reporting is a significant task, and it will only collect what it needs and uses, keeping such requests under constant review. The FCA has already identified three regular data returns it plans to withdraw, with more likely to follow.

The New Data Burden on Consumer Credit Firms

This intent appears to contrast sharply with the new Product Sales Data (PSD) reporting, with the FCA introducing new requirements for the 40,000 consumer credit firms it regulates. The proposed changes extend across the entire consumer credit market.

Not only will this represent a step change in the volume and sensitivity of data the regulator holds about UK consumers, but it will also introduce an additional regulatory burden for the firms within scope.

The new reporting framework includes three separate returns—covering sales, performance, and ‘back book’ (existing loan) data. It asks for information on affordability assessments, arrears, forbearance, and other key metrics.

There are over 250 data fields set out in the draft return, which will be requested quarterly. While not every field applies to every lender, the scale is significant, raising the possibility of the FCA collecting tens of billions of data points over time.

Costs, Complexity, and Market Impact

The FCA has stated that the new return is designed to help it better understand the consumer credit market. However, many CCTA members have expressed serious concerns about the cost of implementing new systems and processes to comply with these data demands.

Implementation costs have been estimated at £80,000 to £150,000 per firm, depending on size and complexity. On top of this, there will be ongoing costs related to staff training and operational overheads.

Just as significantly, we will change how credit is applied for. The process will be much more complicated, and the information required will be much more detailed.

Some smaller firms have indicated that it may no longer be viable for them to continue trading.

While the regulator has adopted an outward focus on promoting growth, the unintended consequence of the PSD proposals may be the further contraction of an already shrinking sector. This inevitably has knock-on effects for access to credit, particularly for consumers who rely on smaller, specialist lenders.

Time for a Rethink?

With reporting due to commence later this year for larger firms, we urge the FCA to reconsider the depth and complexity of its proposals. There is still time to make a change.

We support the goal of building a better understanding of the market, but this must be balanced with the capacity of firms to deliver new obligations, particularly smaller and non-bank lenders who are already subject to high regulatory pressure.

A truly smarter regulatory approach would involve meaningful consultation with the sector and a willingness to adapt proposals where the cost to firms risks further restricting consumer access to safe, responsible credit.