On 27 June 2022, the FCA published a portfolio letter setting out its supervisory strategy for mainstream consumer credit lenders (MCCLs).
In the letter, the FCA outlined the key risks of harm for MCCL firms, their consumers and the markets in which they operate. The letter also outlines the FCA’s expectations of MCCL firms particularly in light of the rising cost of living and the actions it intends to take. The risks are grouped into four priority areas of focus:
- Treatment of borrowers who fall into financial difficulty;
- Inadequate assessment of affordability;
- Persistent debt strategies; and
- Section 75 Consumer Credit Act responsibilities.
FCA is particularly concerned that consumers least likely to be able to bear the rises in the costs of living will be hardest hit by it and that demand for credit will rise while borrowing becomes less affordable. The letter is another reminder to all firms that they are expected to conduct their activities in a way that treats consumers fairly and comply with the FCA Principles and Handbook rules and guidance. FCA thinks that many of the messages it gave in its relevant pieces of Covid guidance can continue to be appropriate now. Firms are expected to reflect on the above key risks and challenge the operation of the firm.
FCA is also concerned about changes to business practices having the potential to cause harm to consumers – not least digitalisation and the move to using Open Banking as a means of assessing affordability.