On 27 April 2023, the FCA published a speech by Roma Pearson (Director of Consumer Finance, FCA) entitled A credit market that delivers for consumers.
Key points in the speech include:
- It is even more important with a rising cost of living that customers are lent to affordably taking account of their financial pressures, receive appropriate tailored forbearance when in financial difficulty, and receive help to avoid falling victim to scams or illegal money lending.
- The FCA expects lenders to work constructively with those who fall behind on payments, or are at risk of doing so, ensuring tailored support can be put in place. When lenders communicate with customers in financial difficulties, they should consider whether it’s appropriate to reduce, waive or cancel fees and charges.
- The points raised in the FCA’s Dear CEO letter of 16 June 2022 and its report of 3 November 2022 remain important.
- The FCA will continue to test whether forbearance practice standards are being met, with a focus on outlier firms, identified from a range of data sources. Where it identifies poor practice, the FCA will take action, in line with its priorities, to test and raise standards in putting consumers’ needs first.
- It is vital that consumers obtain good quality debt advice that has regard to their best interests and is based on a sufficiently full understanding of their circumstances.
- The FCA’s review of firms’ plans for the new Consumer Duty highlighted 3 key areas where firms should particularly focus their attention during the second half of the implementation period. These are:
- Effective prioritisation: Being clear on the basis for prioritising some implementation work ahead of others.
- Embedding the substantive requirements: Ensure plans meet the new standards and reflect the work, which should be well underway, needed to meet with the requirements of the Duty.
- Working with other firms to share information across the distribution chain. The FCA has found some plans that give little focus to this area.
- As firms oversee the implementation of the Duty, boards and management bodies should focus and provide challenge on these 3 areas. In terms of specific priorities for action firms:
- Should share the relevant information necessary to comply with the Duty with commercial partners and make sure they are on board. This will likely include distribution networks and wholesalers as well as retailers and relevant third parties.
- Should focus on the areas that will have the biggest impact on outcomes for customers. Firms should ask themselves the obvious question: is the product or service designed to deliver good outcomes for consumers?
- Can make sure they have clearly identified their target market and consumers understand the communications.
- Can ensure that any lingering sludge practices are addressed – practices that deter customers from taking action in their interests, such as making a complaint or switching to another product or provider; or any unreasonable additional costs such as punitive exit fees are removed.