The FCA has published a speech by its CEO, Andrew Bailey, which is entitled The consumer credit landscape today.
Highlights in the speech include the FCA:
- has been regulating consumer credit for almost four years and it continues to be a key sector for the regulator;
- is looking at developments in consumer credit to ensure that lending is affordable and sustainable; and
- recognises that consumer credit is not a monolithic market and it is intervening on specific products including credit cards, overdrafts and rent-to-own.
Among other things Mr Bailey discusses Personal Contract Purchases (PCPs). He explains that the use of PCPs has grown rapidly in recent years and the majority of new car finance is now in this form. The shift to PCP based lending to finance cars recognises the nature of a car as an asset, with consumers more comfortable leasing or renting than owning outright. That said the FCA is looking carefully at a number of possible conduct approaches by lenders:
- Are firms taking the right steps to ensure that they lend responsibly, in particular by appropriately assessing whether potential customers can afford the product in question?
- Are there conflicts of interest arising from commission arrangements between lenders and dealers, and if so are these appropriately managed to avoid harm to consumers?
- Is the information provided to potential customers by firms sufficiently clear and transparent, so that they can fully understand the risks involved and make informed decisions?
- Are firms managing the risk that asset valuations could fall and ensuring that they are adequately pricing risk?
Mr Bailey states that the FCA expects to publish an update of this work in March.
View The consumer credit landscape today, 27 February 2018