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Chief executives of high-cost short-term lenders have been told to take prompt action to ensure their creditworthiness assessments are compliant and to make redress where deficiencies are found.
Editor at Credit Strategy. Previously held roles at Accountancy Age, Accountancy Daily and the Leicester Mercury.
In its letter, the Financial Conduct Authority (FCA) calls on lenders to assess their lending activity to determine whether creditworthiness assessments are compliant. If shortcomings are found, it said firms should take remedial action to ensure ongoing lending activity is compliant and consider whether proactive redress may be required.
It also said firms should inform the FCA if they are unable to meet their financial commitments because of any remediation costs, now and in the future.
“We expect firms to make appropriate provision for any remediation which may be required, including associated costs, for example, fees to the ombudsman,” the letter reads. “If doing so calls into question your firm’s ability both now and in the future to meet its financial commitments as they fall due, you must notify the FCA immediately.”
The regulator also reminded lenders of its requirements in relation to affordable lending, adding that it expects firm to review their current lending processes to ensure they are fully compliant with our rules.
“If the firm identifies that its processes do not comply, it should take appropriate steps to address this, which may include considering whether to cease lending until any contraventions are remedied,” it said.
The warning from the FCA comes as lenders in the high-cost short-term lending and high-cost credit space are facing increased regulatory pressure and increased numbers of complaints sent to the Financial Ombudsman Service (FOS).
Claims such as these were blamed in part by payday lender Wonga for its collapse in August.
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