Portfolio Letter - FCA Strategy for Consumer Lending

In March, the FCA issued a Portfolio Letter for Consumer Lending Firms which is the focus of our latest gap analysis template.

Notably, this marks the first time the FCA has simultaneously released three letters, as it addresses High-Cost Lending, Mainstream Consumer Credit, and Credit Union Firms in one go. The rationale for merging these letters is based on the shared characteristics in products, customer demographics, and associated risks. Whilst a specific communication for Motor Finance, Retail Finance, and Mortgage providers will be forthcoming, all Firms should take note of any read across or advice in the current letter.

The FCA’s stance is clear: a well-functioning market depends on firms “lending affordably and sustainably, mitigating the risk of poor consumer outcomes, and providing appropriate assistance to consumers facing financial hardship”. The letter also emphasises an overarching theme of heightened customer vulnerability and decreased financial resilience, something that should be a priority to address for all Firms. Particularly in light of the anticipated thematic review on vulnerability that is due this year.

The FCA expects Firm Board’s to discuss this letter and evidence the actions taken in response. Our Regulatory Gap Analysis is the perfect way to do this as it sets out the key themes of the letter and includes well thought out business questions to ask yourself for the identification of potential harm risks and to evaluate your current framework.

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