The FCA Commits to Being ‘More Assertive’

The regulator is aiming for higher standards that will “require more judgement and less box-ticking”

In mid-July, the Financial Conduct Authority (FCA) published its first business plan under new Chief Executive Nikhil Rathi. After a challenging last year, Rathi accentuates the positives stating that the organisation; “acted with confidence, energy and effectiveness to stand up for consumers and businesses all over the UK.” However, it is true to say the FCA came in for criticism, most publicly from MPs citing a lack of accountability for the collapse of London, Capital and Finance and an increase of 68% in complaints. Addressing these issues is a core focus of the plan.

Appointed on October 1st, Rathi has the platform to be the ‘new broom’ re-energising and re-imagining how the FCA faces up to a financial service market changed by the pandemic, Brexit, technology and the drive to a greener economy, noting; “we are an organisation that also needs to transform.”

The FCA is on a mission to up its game, to become more ‘proactive’ and ‘assertive.’ To underline a core message, the word ‘assertive’ appears seven times in the plan.

Why this matters now

Ensuring consumer credit markets work well for consumers remains one of the FCA’s four priorities. After the last year when the pandemic very arguably resulted in other regulatory priorities, we have seen clear evidence of an increasingly proactive regulator this year;

• Buy Now Pay Later (Deferred Payment Credit) is now to be regulated
• High-Cost Credit has come under intense scrutiny
• A new proposed Consumer Duty complete with rapid development schedule

While the message for consumer credit providers and dealers remains the same; the right systems and controls and a positive customer-led culture focused on good customer outcomes, there are some additional nuances. These include prominent references to the importance of diversity & inclusion and the need for innovation that meets their rules and improves overall market outcomes.

Amongst the almost 50-page plan, some additional references are worth highlighting, notably;

• Disclosures – the plan notes that these don’t always have as much impact on consumer decision-making as the FCA would like. It is something dealers should consider when it comes to commission disclosures, especially with the regulator’s supervisory work assessing the impact of the new rules that came into force in January starting in September.
• Affordability – an issue that has risen to ‘significant focus’ due to the financial impact of COVID-19 on many people. Primarily relevant to lenders, this could have a knock-on impact upon dealers.
• Financial promotions – the rules are to be strengthened.
• The proposed Consumer Duty – something that would see new rules before the end of July 2022.

And there is substance behind the plan. £120 million of spending over the next three years to improve the regulator’s data strategy, an increased headcount, new offices in Leeds, Belfast, and Cardiff and a new energy and evident drive to address the criticisms it has received.

For people with SMCR accountability, taking note of the plan could be very worthwhile; changes are ahead.