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Dear CEO | Release Date: 20th March 2024

To read a longer summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Short Summary

The FCA’s strategy for Consumer Lending, detailed in a “Dear CEO Letter” dated 20 March 2024, emphasises the importance of the Consumer Lending market to the UK economy, particularly highlighting three key portfolios: High-Cost Lending, Mainstream Consumer Credit Lending, and Credit Unions. The FCA’s goal is to foster a thriving, innovative, and safe Consumer Lending market where credit is affordable and accessible, especially to vulnerable consumers. This requires firms to engage more with the FCA, embrace innovation responsibly, and ensure sustainable lending practices.

The letter outlines several significant issues within the Consumer Lending sector, including inadequate creditworthiness assessments, reliance on relending, products promoting persistent use, insufficient support for consumers in financial difficulty, poor complaints management, and failures in meeting redress liabilities. The FCA has identified key risks of harm these practices pose to consumers and the market, informing its supervisory focus for the next two years.

Firms are urged to demonstrate their actions in addressing these risks, with a particular emphasis on lending responsibly and sustainably, ensuring fair pricing, supporting consumers in financial difficulty, effectively handling complaints and redress, mitigating risks of financial crime, and maintaining robust governance practices.

Additionally, the letter discusses the Consumer Duty, policy changes, and specific actions required from firms to meet FCA standards. It highlights the expectation for firms to cooperate with FCA data requests and maintain updated information on the Financial Services Register.

Summary of Takeaways and Actions for Affected Readers

Firms in the Consumer Lending sector should carefully review their practices against the FCA’s outlined expectations, particularly focusing on responsible and sustainable lending, fair pricing, support for consumers in financial difficulty, and robust governance. Firms must act to address the identified risks, ensure compliance with the Consumer Duty, respond appropriately to policy changes, and maintain accurate and timely data submissions to the FCA. The letter encourages firms to innovate responsibly and support access to affordable credit, while also preparing for ongoing FCA supervisory activity focused on these areas.

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