July 2019
Shortly after the previous issue of Advantage in June, the Financial Conduct Authority (FCA) launched a market study in order to examine just how the credit information market operates and the impact it has on consumers.
It said: “Firms use credit information when assessing credit risk and affordability. Therefore, it can impact how likely consumers are to be able to access a range of financial services, including mortgages, loans and credit cards and, in some cases, how much they pay for them. This is significant as, according to the FCA Financial Lives Survey, nearly 4 in 5 adults hold at least one credit or loan product. Furthermore, those vulnerable customers for whom a lender’s decision is more finely balanced are most likely to be affected if the credit information market is not working well”.
Christopher Woolard, Director of Strategy and Competition at the FCA, said:
‘We have launched this market study as we have identified concerns about the coverage and quality of credit information, the effectiveness of competition between credit reference agencies, and the extent of consumer engagement.
‘Through the study we will seek to get a better understanding of how this vital market works and will identify remedies, where appropriate, to make it work more effectively for credit information users and individual consumers. This includes considering whether vulnerable customers are disproportionately affected by the way credit information is used, and whether any alternative approaches might deliver better outcomes for consumers.’
Two key areas of this market study will focus on:
The former should include some interesting compliance related analysis around this month’s theme of fees and charging structures. Regulated firms should take time to document and confirm a clear and consistent approach to the advice fees that they may charge along with the thought process on how these fee levels were arrived at.
The latter point appears to re-visit some familiar territory that the regulator explored in some depth during 2007/08 when they undertook a review of Treating Customers Fairly (TCF)
within the regulated Investment, Mortgage and Insurance space at that time. The FCA will no doubt look to understand just how a firm can satisfy itself that consumers are receiving appropriate and suitable advice – do firms actively solicit feedback from their customers and if so, what do they do with this information?
The FCA will report on its preliminary conclusions on these themes in spring 2020 including, if appropriate, a discussion of potential remedies. If you take compliance services from the Consumer Credit Centre team, to get ahead of the game, you may wish to take a look at the “Conduct of Business” and “Treating Customers Fairly” sections of the Compliance Hub, as time spent in reconnaissance is seldom if ever wasted!!
For further information and for details of the compliance support available , please feel free to contact the Consumer Credit centre Compliance team on 01484 443424.