FCA Proposed Changes to Consumer Credit Regulatory Returns

The FCA is proposing significant changes to consumer credit regulatory returns, targeting firms involved in activities like credit broking, debt adjusting, debt counselling and providing credit information services. These proposed changes, detailed in Consultation Paper CP24/19, aim to collect better data, improve supervision and enhance consumer protection in the evolving consumer credit market.

Background

Since 2014, the FCA has used regulatory returns to gather information from firms involved in consumer credit activities. However, the consumer credit market has evolved significantly, with new business models and changing consumer needs. The existing data collection methods often require additional engagement, manual intervention, and may be inefficient in identifying risks early.

To address these issues, the FCA is introducing a new regulatory return that will use tailored questions based on a firm’s activities. The aim is to gather more accurate, consistent, and context specific data, which would allow the FCA to better identify risks, supervise firms and reduce harm to consumers.

Proposed Credit Regulatory Returns

The proposed credit regulatory returns target firms that provide credit broking, debt counselling, debt adjusting and credit information services. They will replace some existing returns with a more streamlined version, using what the FCA terms as “branching logic.” This means that the questions a firm receives will be tailored to its specific activities, ensuring that the data collected is both relevant and meaningful. The return includes five core sections applicable to all firms:

1. Permissions – Inquiries regarding the regulated activities firms have undertaken
2. Business Model – Details about financial products, goods, and services provided
3. Marketing – Information about the channels used to target consumers
4. Revenue – Breakdown of revenue from credit-related and non-credit activities
5. Employees – Questions about the number of employees, incentive and remuneration structures

After these core questions, firms will be asked additional questions specific to the permissions they hold. This customised approach is intended to make the process more efficient for firms and improve the quality of data collected by the FCA.

 Objectives

The new data collection framework aims to make the FCA a more data driven regulator, enhancing its ability to supervise consumer credit firms effectively. This will help the Regulator to:

1. Identify High-Risk Firms: By collecting more specific data, the FCA can identify firms that exhibit characteristics of higher risk and prioritise them for supervision.
2. Act Faster: With better quality data, the Regulator expects to intervene more quickly to prevent consumer harm.
3. Reduce Burden on Firms: By making returns more tailored and specific, firms should find it easier to comply, reducing the need for additional ad hoc data requests.

The new return is also expected to help the FCA achieve its operational objectives, which include securing an appropriate degree of consumer protection, enhancing market integrity,\ and promoting effective competition.

Timeline

The FCA plans to implement the new rules in early 2025, with the first reporting period covering the entire 2025 calendar year. To help firms adjust, the FCA will extend the time allowed for submitting returns from 20 business days to 40 business days from the end of the reporting period. Additionally, the FCA has developed a prototype of the new return, allowing firms to familiarise themselves with the changes before they come into effect.

What first should do next

Firms are encouraged to reply to the FCA with their feedback on the new proposed credit regulatory returns before the consultation closes on 31 October 2024.

Complyport can help your firm understand the proposed changes to the consumer credit regulatory returns and make sure it abides by its reporting obligations, meeting the Regulator’s expectations.

We can support you by providing:

1. Regulatory Guidance: helping your firm understand the FCA’s expectations and providing expert advice on the relevant regulatory requirements;
2. Ongoing Support: providing ongoing support to ensure that your firm remains compliant as regulations evolve; and
3. Training: providing training sessions to educate staff on the practical requirements and best practices for compliance.

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