Dear CEO | Release Date: 27th June 2022
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 recent communication to Chief Executive Officers of Mainstream Consumer Credit Lenders (MCCL) outlines a supervisory strategy focused on addressing key risks and regulatory expectations. The letter reflects on challenges faced due to COVID-19 and emphasises the rising cost of living’s impact on consumers, particularly those with low financial resilience. The FCA expresses concerns about the increased likelihood of consumers facing financial difficulties and potentially accessing unsuitable credit products.
Firms are urged to be vigilant about the changing financial conditions of their customers and to ensure robust governance arrangements to manage and mitigate associated risks effectively. The FCA expects firms to provide targeted support to those in financial distress, leveraging guidelines like the Tailored Support Guidance (TSG) and the Vulnerable Customer Guidance (VCG) to ensure fair treatment, especially in light of the escalating cost-of-living crisis.
Additionally, the letter discusses the FCA’s Business Plan and Strategy for 2022 to 2025, emphasising the importance of high standards across financial services, enhancing competition, and fostering positive change. The strategy is aligned with ongoing economic challenges, including inflation and interest rate rises, which require a dynamic regulatory response to protect consumer interests effectively.
Key Take-aways for Affected Readers:
MCCL firms should rigorously evaluate and adjust their operational and risk management strategies to address the direct and indirect impacts of the current economic environment. Ensuring the fair treatment of customers, particularly those vulnerable or in financial difficulty, is paramount. Firms must be prepared to demonstrate compliance with FCA guidelines and proactive customer support strategies. Continuous engagement with regulatory frameworks and adaptations to new challenges will be crucial for meeting FCA expectations and ensuring consumer protection.