What does this mean?
The FCA has stated that it views the transfer of regulation as a real opportunity to raise standards, increase borrower protection and ensure that firms put customers at the heart of their business. Many affected firms are already regulated by the FCA for insurance intermediation and will be familiar with the standards of FCA regulation, while for other firms FCA regulation will be entirely new. In either case the transfer of consumer credit to the FCA marks a massive step-change from the OFT’s old-fashioned reactive style to the FCA’s media savvy and consumer-friendly regulation. Firms will need to reconsider their business models, product design and distribution processes as well as allocation of management responsibilities and flows of management information.
How can we help?
We can help you prepare for the coming regulation by carrying out a succinct and focused review of your consumer credit business, assessing whether your governance meets the FCA’s current standards and the business fulfils the FCA’s Treating Customers Fairly criteria that it has said are central to its plans. In addition to the workings of consumer credit we have extensive experience in advising retail and wholesale firms in meeting the FCA’s requirements in relation to governance, TCF and regulatory projects generally. We have advised firms in over 350 enforcement actions brought by the FCA and its predecessors which has given us an exceptionally clear understanding of what conduct is acceptable, and what is not.
What do we propose?
What we propose is to review the six key areas of your consumer credit business:
1. How does senior management oversee your consumer credit activities, what management information does it receive and how does it act on it? Will this meet FCA requirements?
2. Does the business have the right culture?
3. How do you identify the risks in the business and how are they overseen and managed?
4. How do you design a new product and ensure that it meets borrower requirements?
5. How do you ensure that the marketing material is fair, and is
distributed appropriately?
6. How do you handle post-sale activities, including redemption, default and complaints?
These areas, which correspond to the FCA’s Principles for Business and Treating Customers Fairly outcomes, will be at the top of the FCA’s main focuses when it looks at firms’ consumer credit operations. They are also radically different to the OFT’s concerns.
How will we do it?
We will perform this review in four stages:
1. An initial telephone conference call to explain our methodology, scope your requirements and tailor our service to what will help you most.
2. A desk-based review of your relevant procedures and policies. We will require to see one representative product pack and one representative set of management or board papers.
3. A detailed meeting when we ask questions around papers and provide initial views.
4. A written report setting out our views and containing recommendations.
Who will do this – and what will this cost?
This work will be overseen by Bill McCaffrey and Simon Morris, CMS financial
services partners with extensive experience in consumer credit and conduct
regulation respectively. The fixed charge will be £10,000 + VAT. Please contact either to discuss this further.
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