The supervisory team at the Financial Conduct Authority (FCA) are looking into the business models and incentives of consumer credit firms, according to Jonathan Davidson, director of supervision - retail and authorisations at the FCA.
Davidson was delivering a keynote speech at Credit Strategy’s Credit Summit, which was followed by an economic update from broadcaster Evan Davis.
Davidson said that his team is looking into how the business models of consumer credit firms are evolving and probing incentives within companies to ensure those incentives "are aligned with consumers’ interests".
He also highlighted briefly that the extension of the Senior Managers and Certification Regime will take effect in 2018.
When asked about firms’ culture in the high cost short term credit sector, Davidson said the culture of these firms was going in the right direction, adding: "The big firms in that sector look very different now. A non exec director at one of these firms told me the other day ’it has been excruciatingly painful for us, but we have emerged a better firm from it.’"
When asked about the extent to which consumers should be responsible for their own borrowing, Davidson said: "Consumers do have to take responsibility for their own use of credit. But firms have to be fair and not misleading and ensure consumers do not take on unaffordable debt. It’s about trust. In order for consumers to trust firms, we have to ensure companies are trustworthy."
Davidson also referred to the fact that some debt management firms are still awaiting authorisation.
He said: "We are working closely with debt management firms not yet authorised to ensure they have a clear understanding of where they stand in the process.
"For the majority of 50,000 consumer credit firms that we invited to apply for interim permission now have their authorisation." Davidson also mentioned that results of the FCA’s review of the price cap on payday lending will be published in the summer.
The Credit Summit, taking place just one day after Article 50 was triggered (March 29), is covering several streams:
The address given by Davidson had a general focus on the FCA’s regulatory outlook for the next 12 months and how the authorisation process has helped shape consumer credit, as well as an insight into innovation in the fintech sector.