The Financial Conduct Authority (FCA) has published a letter outlining the key risks credit brokers could pose to consumers or markets, and potential measures to stop the malpractice.
The regulator said it will be putting a greater emphasis on pre-empting potential harm to consumers, using its assessment and harm-reduction tools in a ‘focused and forward-looking way’.
After assessing a range of information and data, including firms’ regulatory histories, and the type and number of complaints received, the FCA found:
- Many firms did not understand their regulatory requirements: including what permissions they need and the need to complete accurate returns.
- Firms have poor oversight of staff and/or appointed representatives’ (ARs) activities: leaving sales practices unchecked, increasing the risk of mis-selling and fraud.
- Increased risk of harm where the sale of goods/services is made in the home: especially when such customers are vulnerable.
- Misleading or inaccurate financial promotions: where consumers make uninformed decisions, such as signing up to poor value deals.
- Firms not explaining the level of service provided: or other factors likely to influence a customer’s decision, e.g. commission benefits.
- Providing inadequate information: hindering customers from making informed choices about products and services.
- Not considering the risks to their business from technology: cyber-attacks and inadequate IT resilience.
Moving forward, the FCA now requires firms to submit accurate regulatory data annually. Should firms fail to comply with the new rules, the FCA will “consider using our full regulatory tools – including enforcement”.
Andrew Kay, head of supervision – retail & authorisations at the FCA, urged firms to take notice of the areas of concerns highlighted. “You should examine your business and consider whether you can make changes or reduce harm or potential harm to consumers.
“We will act where we find that firms have not put their customers at the heart of how they do business. For example, where they have put their own profits and income above paying due regard to customers’ interests and treating them fairly.
“We aim to identify firms which appear to cause such harm. Whatever the size of your firm you should have appropriate governance and systems and controls in place. If we contact you we expect to be able to provide evidence of these and your wider actions to safeguard consumers from harm. If you cannot do this we will make full use of our regulatory powers to address the weaknesses we have identified.”
The letter is available in full here.