The last twelve months have been a busy period in the regulation of consumer credit. The FCA has continued to focus on affordable lending, customers in financial difficulty and more recently on the treatment of vulnerable customers. That, coupled with Consumer Duty implementation and embedding, including the production of the first Annual Board Report means there has been no let up for firms.

At the same time, the FCA have also strengthened their approach to supervision by requiring consumer credit firms to provide extensive new data, reinforcing their data led approach to identifying harm.

As we look towards the next twelve months, the FCA will continue to strengthen protections for customers in financial difficulty. Policy Statement PS24/2 brings in new rules from November which includes taking aspects of the Tailored Support Guidance (TSG) and moving them into the FCA Handbook. Given these customers are also likely to be vulnerable, firms will need to ensure their policies, procedures and outcomes monitoring is effective, with the latter providing the evidence that customers are receiving tailored and sustainable forbearance that results in good customer outcomes.

The significant changes to consumer credit data reporting, as set out in PS24/3, will require firms to provide extensive granular data on the sale and performance of credit agreements in the form of three new Product Sales Data (PSD) returns. While these requirements come into force on a phased approach, firms need to act now, ensuring they can easily retrieve and report the required data. And in line with existing Consumer Duty monitoring requirements, be able to identify harm with clear action plans to remedy poor outcomes.

Given higher interest rates in both the credit card and personal loans market, another area of focus will be Price and Value. This is a key outcome under Consumer Duty which the FCA expect all firms to be able to demonstrate. While the FCA understand that credit risk in certain consumer cohorts is greater, they will be scrutinising firms to ensure they are not capitalising by increasing prices unfairly and offering products that do not provide fair value. The key here is to be able to evidence that the price the consumer pays for the product, and ongoing fees and charges over the product lifetime, are reasonable compared to the overall benefit the consumer receives.

Complaint handling will also be an area of focus. The FCA is currently conducting a multi-firm review of high-cost lenders, with preliminary findings indicating areas for improvement. Poor complaint handling exposes firms to a range of issues and firms need to ensure their complaint handling policies, procedures and controls, including root cause analysis is not only compliant with DISP, but also delivers good customer outcomes in accordance with Consumer Duty outcome 4 – Consumer Support.

And finally, underpinning all of this, firms must have robust governance practices and risk management protocols to identify, monitor, manage and evidence customer outcomes. During H2, the FCA will be reviewing a sample of Consumer Duty board reports and in accordance with SM&CR, will hold firms, their senior managers and boards accountable where poor outcomes are occurring.