On 2 November 2020, the FCA issued a call for input seeking views into how the unsecured credit market is changing, particularly in light of the COVID-19 pandemic, and how regulation can support this market.

The call for input is focussed on the following four key themes:

  1. Drivers and use of credit. The FCA has already undertaken research into the unsecured credit market, including through its ‘Financial Lives’ work. The FCA wants to use this review to better illustrate how different groups of consumers engage with the unsecured market. This includes: the reasons for using credit; the way that credit is presented and marketed to different groups; and changes in how people interact with lenders, including the growth of digital and ‘on demand’ credit offerings and whether use of these is leading to consumers relying less on more traditional forms of credit. The FCA is also looking for information to understand the trends around consumers’ use of credit and to identify where future pressures and challenges may lie.
  2. Change and innovation in the supply of credit. The FCA wants to explore the ways unsecured lending is undergoing change and to look at how far innovation is acting in consumers’ interests. This includes the recent growth in unregulated forms of credit, such as some ‘buy-now-pay-later’ arrangements which are currently exempt from FCA regulation.
  3. The role of regulation in unsecured credit markets. An important role of regulation is to try to align the incentives of firms with those of their customers. The FCA is interested in how changes in the credit market could better align incentives for firms. Where there can be cross-subsidisation between customers within products and across a firm’s books, the FCA is interested in views on how this can be beneficial and where it can lead to harm.
  4. The impact of COVID-19 and the FCA’s response. The FCA wants to understand the way the COVID-19 pandemic has impacted both supply and demand for credit, and how the current situation is likely to affect the market in the future.

The FCA review team will also be seeking evidence through a series of roundtables in November, individual interviews and research, as well as the call for input. The work will be supported by an Advisory Panel, which will bring a range of perspectives from firms and consumer groups to shape the review.

The deadline for responding to the call for input is 1 December 2020