The FCA have now had a few months to start showing their presence in the consumer credit market and have done so through a number of thematic reviews, firm visits and surveys. They have issued a number of fines and started s166 reviews that have specifically been focused in the pay day lender sector. Using our experience of working with the consumer credit sector over the last couple of years and understanding of the FCA's expectations more widely, this blog post shares some insights and tips on how consumer credit firms can prepare for an FCA visit and the application process. 

Preparing for FCA visits

The FCA has been embarking on a number of themed supervisory visits.  Typically they will give around 4 weeks' notice of a visit but have also carried out some unannounced visits where they have intelligence of issues at a particular firm.  The visits will mainly focus on getting to know you and understand your business model although they will also look at other areas. To prepare for a visit, make sure you: 

  • Have a plan to demonstrate where you are on your journey and the timescales you are working toward - be open and honest about progress but clear that there is a plan and timetables are achievable. The FCA will take comfort where they see change has happened and that a plan is in place.
  • Consider areas of possible challenge relevant to your particular business. Remember the FCA will follow the money and will explore your key income generators.
  • Be succinct with your responses; allow them to drive the level of detail they want from their questions.

Authorisation Application Tips

Plan in advance

Sounds obvious but how often do we procrastinate and think we can put this on the back burner and pick up nearer the time, only to find that time suddenly appears and we are totally unprepared? As you must submit your application in the given time period and it must be complete, there is no excuse for being unprepared. Below are our top 5 tips to ensure you can meet the required deadline:

  1. Application packs can be started well in advance of your allocated time slot and saved down in the FCA online system.
  2. Plan to submit at the start of the application period you have been given to ensure any unanticipated delays cause you to overrun.
  3. Detail a time line for the overall process building in approval times.
  4. Look through the application pack and supplementary guidance in detail to ensure you fully understand what is required.  Consult the FCA or compliance professionals if there is any doubt as to what is needed.
  5. Assess the need for any additional resource to support the application process to ensure there are no disruptions to BAU.

Key challenges in completing application

To ensure you're ready for the FCA, it's important that you think about the key challenges they will have to your particular business and ensure you are able to readily demonstrate you have properly thought through these areas of challenge. This will reduce the amount of queries the FCA will raise with you, reduce the time they spend on your application and give them a more positive view of the compliance culture in your firm.

Below are some of the hot topics on the front of mind of the FCA:

  • Incentive schemes – Firms need to review their incentives and consider what impact they have on customers.  They should consider using a balance scorecard approach where good customer outcomes overrule sales volumes.
  • Financial promotions – The FCA is currently focussing on financial promotions in the consumer credit market.  They are looking at advertisements first but will start to look at websites and hand-outs soon.  Now is an opportunity to review your website and make any necessary changes.
  • Affordability – Firms should review their affordability assessment process to ensure the checks are appropriate for their business model and that that the results of those checks are used to make informed and suitable credit decisions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.