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Too many consumer credit firms have high-risk elements in incentive schemes and haven’t spotted the risks they pose to customers, according to a report from the Financial Conduct Authority (FCA).
Group Editor
In a review on staff incentives, remuneration and performance management in consumer credit, the FCA is consulting on measures to address the risks that can arise from the way consumer credit firms pay or incentivise their staff.
After reviewing a sample of 98 consumer credit firms, the FCA found that a significant proportion of firms had:
The report states: "Too many of the firms in our sample had high-risk elements in their incentive schemes and had either not recognised the risks these posed to customers, or had not taken sufficient steps to manage those risks.”
The FCA also found that many firms, where consumer credit activities were ancillary to their main business (such as selling retail goods), as well as a number of lenders, had
not properly assessed the risks associated with their consumer credit activities, or the impact that staff incentives could have on those risks.
Jonathan Davidson, executive director of supervision, retail and authorisations, said: “The way firms pay and manage the performance of their staff is a key driver of culture and customer outcomes, and a continuing priority for the FCA.
“We expect firms to understand the effects their staff incentives might be having.”
The 98 firms visited covered a broad range of sub-sectors including:
More to follow.
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