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Dear CEO | Release Date: 27th June 2022

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

To access the original FCA document, click here.

Long Summary

This document is a comprehensive summary of the Financial Conduct Authority’s (FCA) updated supervisory strategy directed towards Mainstream Consumer Credit Lenders (MCCL). It elaborates on the supervisory outlook, identifies prevailing and potential risks, and delineates the FCA’s expectations for MCCL firms. This update follows significant economic shifts influenced by the COVID-19 pandemic and addresses new challenges such as the rising cost of living, which impacts both consumers and the operational modalities of MCCL firms.

Introduction to Supervisory Context

Following a period marked by unprecedented global health challenges, the FCA has refocused its supervisory strategy to adapt to the evolving financial landscape. This letter updates the previous communications from December 2020, reflecting the ongoing economic stressors that continue to shape consumer behaviour and credit markets. It aims to guide MCCL firms in aligning their operations with both current and forthcoming regulatory expectations, ensuring they are well-equipped to manage risks effectively and protect consumers under their service.

Detailed Overview of Key Risks and Regulatory Expectations

Economic Challenges and Consumer Impact

Inflation and Cost of Living: The FCA points out the sharp increase in the cost of living, with inflation rates soaring to historic highs, disproportionately affecting the least financially resilient consumers. The detailed analysis predicts a strain on personal finances across broad consumer segments, which could escalate the demand for credit while simultaneously impacting the ability to service debt.

Vulnerable Consumers: The letter emphasises the need for MCCL firms to intensify their focus on consumers who find themselves financially vulnerable due to these economic pressures. Firms are expected to implement comprehensive strategies that ensure these consumers are treated fairly and provided with necessary support, including tailored forbearance options.

Operational Resilience

Risk Management: Firms are urged to bolster their operational resilience to withstand a surge in consumer contacts and potential cybersecurity threats. The FCA stresses the importance of robust internal controls and effective governance structures that can dynamically respond to these operational demands.

Consumer Interaction: Special attention should be given to adapting consumer interaction channels to handle increased volumes without compromising service quality or data security.

FCA’s Supervisory Strategy and Programme of Work

Strategic Focus Areas

Harm Reduction: The primary focus is on reducing harm by closely monitoring MCCL firms’ interactions with consumers, particularly those at increased risk of financial distress.

Regulatory Standards: Setting and enforcing high regulatory standards to ensure that all MCCL firms operate transparently and fairly, maintaining the integrity of the financial markets.

Market Competition: Encouraging healthy competition within the market to foster innovation and better service delivery that benefits consumers.

Supervisory Actions

Continuous Engagement: The FCA plans to maintain an active engagement cycle with MCCL firms, employing both routine and targeted assessments to ensure compliance with set regulatory standards.

Data-Driven Supervision: Utilising advanced analytics and data submissions from firms to monitor market trends and consumer impacts, facilitating a proactive supervisory approach.

Comprehensive Takeaways and Actionable Steps

Immediate Actions for MCCL Firms

Consumer Protection Enhancements: Firms should critically assess and enhance their consumer protection mechanisms, ensuring they are capable of identifying and supporting consumers in distress.

Affordability Assessments: Strengthening the processes around affordability assessments to prevent consumers from obtaining credit beyond their repayment capacity, particularly in a volatile economic environment.

Long-Term Strategic Considerations

Governance and Oversight: Strengthening governance frameworks to incorporate comprehensive risk assessment tools that align with the FCA’s expectations for operational resilience and consumer protection.

Regulatory Compliance: Ensuring ongoing compliance with evolving FCA regulations by maintaining open and transparent communication lines with the regulator and promptly addressing any compliance issues.


MCCL firms are expected to integrate the insights and directives from this letter into their operational and strategic frameworks. The aim is to align with the FCA’s regulatory expectations, thereby enhancing the financial well-being of consumers and contributing positively to the stability of the credit market. The FCA commits to continuous monitoring and engagement, providing support and intervention where necessary to uphold the standards of consumer credit practice.

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