The FCA has confirmed that it has commenced two new consumer credit thematic reviews, looking at credit firms’ remuneration systems and at the way firms manage customers in arrears.
The remuneration thematic review will be very wide ranging. Not only will firms of all sizes be visited, but the review will encompass debt collectors, as well as firms selling credit products; and will also include firms for whom credit is a secondary activity.
The FCA is known to be concerned where firms have remuneration systems that encourage salespeople to recommend unsuitable products, where staff are threatened with disciplinary action if they do not hit sales targets, or where a large proportion of an individual’s remuneration is made up of bonuses or commission. Instead, the FCA suggests that performance related pay should be based on the compliance standards displayed by the salesperson, or on the quality of their customer service.
The arrears review will be primarily concerned with ‘early arrears’, which refers to the period from when a firm should identify that a borrower is experiencing financial difficulties, to the point where the firm declares the borrower in default. The review will assess firms offering unsecured lending products, including personal loans, credit cards and retail finance.