Dear Director | Release Date: 13th February 2020
To read a longer summary of this Dear Director letter, click here.
To access the original FCA document, click here.
Short Summary
The FCA’s letter to directors of credit broker firms highlights significant risks these firms might pose to their consumers and the broader market. It outlines the importance of understanding and mitigating these risks as part of the FCA’s new supervision approach, grouping firms into portfolios based on business models, and focusing particularly on credit brokers until March 2022.
The FCA points out common issues within the sector, including a lack of understanding of regulatory requirements, poor oversight of staff and Appointed Representatives (ARs), misleading financial promotions, and inadequate information provision to consumers. These lapses can lead to regulatory actions, mis-selling, fraud, and poor consumer outcomes. Particularly at risk are transactions in domestic premises, where aggressive sales tactics may prey on vulnerable consumers.
The FCA’s supervisory strategy is forward-looking and emphasises pre-empting harm through focused assessments. It plans to monitor firms closely, especially how they manage data accuracy, oversee staff and AR activities, and control financial promotions. Additionally, the supervision will review credit brokers’ oversight in the sale of Third-Party Finance Providers (TPFPs) and domestic premises suppliers (DPS), where the risks of consumer harm are potentially higher.
Key Takeaways and Actions:
Credit broker firms should critically assess their business models and practices to ensure they align with FCA requirements and genuinely protect consumer interests. The FCA expects firms to maintain robust governance and control frameworks, be proactive in compliance, and ready to evidence their consumer protection measures during FCA engagements. Firms must also stay updated with FCA communications and guidelines, ensuring any necessary changes are implemented swiftly to reduce potential harm. Missteps or non-compliance could lead to stringent regulatory actions.