This week saw the release of the latest FCA white paper – CP15/6. It’s a wide ranging sweep up of current and potential regulatory risks and concerns that gives an insight both into the regulator’s thinking about future challenges and their planned response to the issues they’ve identified. This article summarises some of the themes and key points, but a full version of the paper can be found at https://www.fca.org.uk/publication/consultation/cp-15-06.pdf .
The overall summary of the consultation paper is that, in reality, it’s more of a tidy up rather than sweeping change. There is very little in the proposals that should really come as a shock to any individual or business that has been paying attention to what the regulator has been saying over the last twelve months. If anything does come as a shock to you, or your business model then you’ve probably got more fundamental issues than just dealing with these relatively minor changes.
There are four main areas focused on within the paper, those being Guarantor Lending, High Cost Short Term Credit, Financial Promotions (adverts to you and me) including a section on credit brokers and finally dealing with arrears, defaults and collections. In keeping with the feeling of the proposed changes, these topics are not new areas for the FCA. It was inevitable with the growing use of the guarantor product that more focus would be applied here, just as it was almost impossible that a new consultation paper would emerge without mentioning HCSTC or credit broking.
The points raised in relation to guarantor lending are heavily focused on the principles of suitability/affordability and clear communication. It would take a brave person to strongly challenge the points the FCA have raised with all of them very clearly aimed at protecting the consumer. Interestingly, the FCA seems to feel that there needs to be some redefinition so that the guarantor is afforded the same protection and communication/information as the applicant. In a market where some lenders openly effectively lend to the guarantor, not the applicant this is key.
The proposals on HCSTC are surprisingly light although alongside the new proposals is a retrospective on the rules pushed through at the start of the year. In reality, where so much as changed, the FCA need to let the changes bed in for a while before making too many other changes.
The focus on credit broking is somewhat deeper, although again very much in keeping with the FCAs views last year. There is an ongoing theme around clear communication and lots of debate over the future remuneration of credit brokers. Completely appropriately there is an angle around ensuring appropriate product placement and it is very clear that there will be a lot of focus in this area over the coming months.
The remaining sections are very much focused on clearing up or clarifying existing points or guidance and with the FCA asking for comments on 23 questions by the start of May it looks like there will be lots of fine tuning for the consumer credit sector to act on in the summer.