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FCA Consumer Credit EventBack

FCAThe Financial Conduct Authority (FCA) held a quarterly consumer credit event on Tuesday 14 July, attended by various trade bodies including the RMI. There were several presentations with talks on creditworthiness, staff remuneration and incentives and FCA supervision.

Some useful information about the FCA’s approach to regulation came from the talks and audience follow up questions, although the focus of the event was naturally wider than the motor retail industry alone.

The FCA reiterated its aims and principles. They pledged ‘proportionality’ as regards small businesses, and emphasised they did not plan a ‘one-size fits all’ approach. It was also underlined that the FCA was more concerned with outcomes than processes with regard to checking a customer’s creditworthiness. They acknowledged that firms desired more guidance, but seemed inclined towards giving examples of good and bad practice, rather than concrete rules. The FCA did give the impression that there would be significant onus on lenders to assess creditworthiness; including the impact lending might have on a customer’s financial situation and their ability to repay.

The FCA is carrying out research to function better. They intend to consult in 2015 to clarify FCA expectations of firms regarding creditworthiness, and to engage with stakeholders in industry and consumer organisations. The FCA is also investigating remuneration and incentive schemes for employees, to prevent mis-selling of financial products. This will include testing of a selection of firms of different sizes from a wide range of sub-sectors.

The FCA was keen to highlight each business’s obligations, both immediate and in the long term. Immediate obligations for any regulated firm are to:

  • Register a Principal User on GABRIEL, the FCA’s regulatory reporting system
  • Ensure familiarity with the Handbook
  • Visit the FCA website for guidance, information and consultations
  • Check the permissions are appropriate for the regulatory activity

Regarding the final point, the FCA suggests that GABRIEL could be a business’s best friend. If upon logging in, information is required for a business area in which a firm does not operate, this is a sign that perhaps a company has the wrong permissions. By registering on GABRIEL a business will also receive reminders of when to report, which is very useful considering the increased burden of reporting. It may be a good idea to register one named employee as the Principal User, but filter email through an account that other colleagues can check. This should stop reminders slipping through the cracks because of staff holidays, sabbaticals or unforeseen circumstances.

The reporting requirement of all regulated firms was examined in depth. The reporting schedule is available once a business registers for GABRIEL, and the frequency of reporting depends on credit revenue and the level of permission. Firms should make certain of fulfilling their reporting requirements or they could face a steep fine of £250. If a firm continues in non-compliance, loss of authorisation is a danger. The FCA further emphasised that firms had on-going obligations that must be met at all times, not only when applying for authorisations.

The slides dealing with these obligations and the other talks can be found by clicking here.

The FCA has also produced a useful pamphlet addressing common misconceptions regarding creditworthiness, which can be found here. A similar pamphlet about consumer credit permissions is available here.

For more information, please contact the NFDA hotline on 01788 538303

Posted by Sue Robinson on 17/07/2015