With the start of the new financial year comes the regular annual business plan explaining what the Financial Conduct Authority intends to do in the next 12 months. One of the most eye-catching announcements is that the regulator is talking about a transformation in the way it collects data, gathers intelligence and invests in technology and people. This will have implications as it “decides which firms and individuals can operate … how firms are supervised, and how unacceptable firms and individuals are stopped and removed from the regulated sector as quickly as possible.”

This is accompanied by a promise to reduce the regulatory reporting burden for firms.

The FCA’s main consumer-focussed priorities for the 2020/21 financial year are ensuring that consumers can:

  • Rely on safe and accessible payment systems
  • Receive fair value
  • Make effective investment decisions without being exposed to undue risk
  • Avoid getting into unaffordable debt
  • Receive fair treatment where they do get into debt problems

In respect of the unaffordable debt priority area, firms that provide loan extensions, rollovers and other repeat borrowing have long been of particular concern to the FCA and the Financial Ombudsman Service. On this subject, the Business Plan says:

“We will monitor the number and proportion of over-indebted consumers and how the volume of arrears and defaults in key markets are changing. We will continue to assess the suitability of creditworthiness assessments to understand whether consumers are being extended credit they cannot reasonably be expected to repay.”

In respect of the last of the issues listed above, the Business Plan stresses the responsibilities of firms to identify and respond to borrowers’ debt responsibilities:

“Our goal is for firms to identify consumers at risk at an early stage and to give them suitable forbearance. We want borrowers to be made aware of, and engage with, debt advice before their financial problems become too severe.”

The FCA’s immediate priorities in the coronavirus pandemic include:

  • Ensuring the most vulnerable get the financial services and the help they need
  • Helping consumers avoid coronavirus-related scams
  • Ensuring firms provide strong support to customers
  • Mitigating the impact on consumers where firms fail

The introduction to the document from FCA chair Charles Randell and interim chief executive Chris Woolard speaks of a need to divert resources away from enforcement activities, saying:

“The current framework is too focused on rules and process, and not enough on principles and outcomes. We see far too many resources devoted to redress and remediation, and not enough to empowering consumers to take good decisions and regulatory action to prevent harm and safeguarding consumers’ financial wellbeing.”

However, a few pages into the document, there is a warning about the FCA’s intention to take more robust enforcement action against smaller firms:

“Over the coming year we will be shifting our focus towards smaller firms. Many, but not all, of the 60,000 firms we regulate are committed to acting in line with our rules and principles. Some are not. We will shift our focus towards those firms that consistently fail to meet our required standards. We will move more swiftly to enforcement action against those that fail to do this and so cause harm.”

Some of the final messages in the Plan will be familiar to many firms, and include:

The FCA’s four main criteria for measuring a firm’s culture are: purpose, leadership, approach to rewarding and managing people, and governance

All firms are expected to have contingency plans for major events – this was one of the first things the FCA said when coronavirus cases began to emerge in the UK.

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