Consumer credit firms who are unwilling to adapt to the stricter requirements of Financial Conduct Authority (FCA) regulation have been informed by the regulator’s acting chief executive that she is happy for them to leave the industry rather than continue to trade in a non-compliant way.
Addressing the 2016 Credit Summit, Tracey McDermott acknowledged that some firms had put in a lot of work to embrace the new regime. However, she then went on to say:
“I think everyone in this room is aware that we’ve also seen certain types of firms exit the industry since the FCA took over consumer credit regulation.
“We have refused authorisation to 40 consumer credit firms who didn’t meet our standards. We have also seen over 100 debt management firms leave the industry. Over 1400 firms in total have either been refused or decided to withdraw their application
“We have set out our expectations of the standards firms must meet to be authorised. And in many cases these are a step change from what was required in the past. But they are not a nice to have. They are critical to ensuring proper protection of your customers.
We are content to see firms leave the industry if they cannot meet these standards.”
Ms McDermott cited the example of PDHL, a large debt management firm whose application for full authorisation was declined by the FCA even though they had been trading for a number of years under the auspices of the Office of Fair Trading. She said that, when considering PDHL, her organisation found “cases of customers’ files not being reviewed for months despite them reporting job losses. In one instance, we found the firm insisting a client should maintain £30 monthly repayments, despite the client having no income.”
According to the FCA chief executive’s remarks, 23 credit firms have already been forced to pay a total of £334 million in customer redress, for issues ranging from inappropriate lending decisions and unfair charges to poor treatment of customers in arrears and improper debt collection practices.
Credit broking, debt management and payday lending were described in the speech as “areas where we see the greatest risk of detriment through poor practices,” and Ms McDermott emphasised to firms operating in these sectors that they can continue to expect close scrutiny.
As well as complying with the FCA’s detailed rules, firms were also asked to ensure they had the right corporate culture – one that operated in the interests of consumers.
On this subject, Ms McDermott commented:
“What we want to see as an outcome is an approach where the interests of customers and the market are at the heart of your business and where you and your staff focus on delivering the right outcomes, not just meeting regulatory requirements.”
On a different note however, she made reference to the ongoing review of the retained Consumer Credit Act provisions. Firms are invited to respond to the FCA’s ‘call for input’ as to which provisions of the Act could be amended or repealed altogether.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.