Changes to consumer credit regulation

Changes to consumer credit regulation

The FCA will use its wide enforcement powers to tackle bad practice and illegal lending to develop standards through credible deterrence.


Also on

Credit Card Transaction

The Financial Conduct Authority (FCA) assumed responsibility for regulating consumer credit on 1 April 2014.

The FCA says it will take a significantly different approach to the Office of Fair Trading’s. It also says it will regulate the market in an ‘intrusive and intensive’ way with much more rigour.  

What does this mean in practice? 

The FCA will use its wide enforcement powers to tackle bad practice and illegal lending to develop standards through credible deterrence. This could include action against firms and/or the individuals within those firms and ensuring consumers have access to redress when things go wrong. 

The FCA’s approach to enforcement 

The FCA enforcement and financial crime priorities are: 

  • To increase the number of enforcements and impose tougher penalties 
  • To actively pursue cases against individuals and to hold senior management accountable for their actions
  • To actively pursue an increased number of criminal prosecutions
  • To actively tackle unauthorised businesses 
  • To prioritise the payment of compensation to consumers 

A significant new tool in the FCA’s enforcement armoury is the power to publicise warning notices about proposed enforcement action. Warning notices will usually name the firm under investigation and, in some cases, the individual involved. Firms should therefore be aware, in future, of their own conduct and the consequences of a potentially non-compliant approach as reputational damage may arise much earlier.  

What should companies do? 

Companies need to focus on preparing for the FCA’s ongoing regulation, in particular:

The FCA will demand documentary evidence that risks are being managed and that customers are receiving a fair outcome. They will also demand evidence that the requirements and standards under the regulatory system are being met, which means that appropriate records should be made/kept. 

The FCA will expect senior management to receive regular assurance on these matters. This may necessitate management information (MI) and 1st, 2nd and 3rd line monitoring enhancements (and they will expect evidence that this MI has been dealt with). 

Companies need to consider any third parties which they outsource credit related activities to. – Do these third parties have the requisite permissions in place? Are they acting in accordance with the FCA’s expectations and requirements? How do companies satisfy themselves regarding this? 

Finally, companies need to recognise that the failing to prepare is preparing to fail and that there are harsh consequences for doing so., Enhanced regulator scrutiny and enforcement action are extremely demanding of senior management time and financial resources. 

What should you do? 

1. Pre-enforcement

Are you prepared to a standard that could withstand FCA scrutiny? 

Can you react quickly and efficiently to the start of an enforcement investigation?

This includes reviewing existing systems and controls to identify potential areas which may be subject to increased risk of enforcement scrutiny. 

2. Ongoing enforcement 

Are you being investigated?

Take appropriate steps to mitigate any outcome of enforcement action. 

3. Post-enforcement

What should you do next?

Companies need to assess the outcome and impact of an enforcement investigation. They must also strengthen their systems and controls with a view to ensuring that the company does not suffer further enforcement investigations. 

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

Connect with us


Request for proposal



KPMG’s new-look website

KPMG’s new-look website