With the new regulatory regime for the consumer credit industry now in full force, it’s imperative that asset finance providers ensure they are fully compliant
October 1st marked a key milestone for all UK companies involved in asset finance or consumer credit activities. Following a six-month transition period, the Financial Conduct Authority’s (FCA) new (and widely publicised) regulatory regime for the consumer credit industry is now in full force.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
This means all consumer credit regulated firms are subject to the regulations set out in the Consumer Credit sourcebook, or ‘CONC’. With the era of FCA oversight promising greater scrutiny and more robust enforcement, it’s vital that each and every businesses involved in the asset finance industry understands both what is now required of them under the new regime, and how they can ensure they are fully compliant.
One of the main issues which lenders should pay particular attention to is that of ‘product suitability’. The CONC stipulates that any firm involved in credit-related regulated activities "must take reasonable care to ensure the suitability of its advice and discretionary decisions" for any customer relying on its advice and opinion.
Often at the point of sale this will not be the lender directly but an introducer such as a car dealer or a broker.
This means that lenders must work closely with their introducers to ensure that they are giving their customers the right advice and that the products they propose are suitable for their means.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataLenders should also carry out a risk management analysis of agents they engage with.
Based on that analysis, they should put processes in place to ensure that their agents are being adequately monitored and supervised so that the lender can confirm that their obligations under CONC are being met.
The lender must also take all other reasonable steps necessary to make sure their agents remain compliant with the CONC.
However, ensuring compliance need not be overly burdensome. There are a couple of straightforward steps firms can take to ease their navigation through the new regime. A good place to start is by your business deciding to undertake a full audit of existing business systems, practises and procedures to understand your business’s regulatory compliance (including in areas such as product suitability, for example) to identify the areas where further action is required.
Another key area that is very important to address is staff training. The FCA’s particular focus on treating customers fairly makes it particularly important that all relevant employees are familiar with the new regulations.
A number of online solutions and external training programmes are available to help firms ensure they have the tools they need to assess thoroughly their level of compliance and provide their staff with the specialist training they need.
Although the changes that are under way can seem daunting (especially given the risks associated with non-compliance), you should take action early and give your business an ‘FCA health check’.
This will be a great help in reassuring you that you have done all that is necessary to face and overcome the challenges ahead and ensure that your business is successful while becoming fully compliant with all the requirements of the new regime.
John Perez is a partner and head of finance litigation at business law firm DWF.
