THE FINANCIAL Conduct Authority (FCA) has urged consumer credit firms to ensure their lending is “affordable and sustainable” as its boss described taking over regulation of the sector as the City watchdog’s biggest challenge to date.
Andrew Bailey (pictured), chief executive of the FCA, is expected to tell the The Finance and Leasing Association annual dinner on Tuesday night that regulating consumer credit was “probably the largest thing that has happened to the FCA in the first five years of its life.”
Overseeing consumer credit added around 34,000 firms to the FCA’s total, taking it from around 24,000 to around 57,000, he is set to say.
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Bailey’s speech comes amid increased regulatory scrutiny of the consumer credit market, particularly into high-cost items such as unauthorised overdrafts and rent-to-own products.
“Firms need to ensure that any lending they advance, whether high-cost credit or not, is affordable and sustainable,” he is expected to say.
“Of course, borrowing can become unaffordable due to a change in circumstances, whether personal or macro-economic, that could not have been reasonably foreseen. But it is important that firms guard against that risk, by having effective policies and procedures for assessment of creditworthiness, including affordability.”
Bailey added that the FCA was considering intervention in the high-cost credit markets to encourage mid-cost alternatives.
“There is an emerging picture of a case for possible intervention in a number of markets but also a recognition of the limits of what can be achieved through traditional regulatory interventions alone,” he said.
“Looking at the shape of the overall market and considering how choices for consumers might be widened is therefore important context. In particular, in certain parts of the market we will seek to intervene to encourage alternatives to high-cost credit, particular those from the ‘mid-cost’ market.”
He also said the FCA would provide an update on its review of the conduct of car finance lenders next month.
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