The FCA has published a ‘Dear CEO’ letter setting out the issues surrounding the increase in complaints about unaffordable lending (including complaints about a ‘chain’ of loans over an extended period), and how it expects high-cost short-term credit (HCSTC) firms to manage the impact.
The FCA reminds firms that complaint-handling procedures should ensure that a firm can improve the way in which complaints are handled. Where a firm identifies recurring or systemic problems when providing a financial service, including problems relating to the carrying out of affordability assessments, the firm should ascertain the scope and severity of the consumer detriment that might have arisen, and consider whether it should proactively undertake a redress or remediation exercise.
In its letter, the FCA asks firms to take prompt action to:
- assess their lending activity to determine whether creditworthiness assessments are compliant, and
- inform the FCA if they are unable(now or in the future) to meet their financial commitments because of any remediation costs.