On 15 March 2018, Jonathan Davidson (FCA Director of Supervision – Retail and Authorisations) delivered a speech on "Getting affordability right in consumer credit".
The speech had three key takeaways for firms in relation to their creditworthiness practices.
First, the FCA reminds firms that it is committed to taking action against such lenders on both prudential and consumer protection grounds where customer harm is identified.
Second, lenders do need to ensure that customers will be able to repay any credit provided in a sustainable manner over the whole term of their agreement, not just in the short-term.
Third, a successful business model relies on a firm having a healthy culture. Firms need to ensure that they do not just complete a box-ticking exercise in order to meet compliance requirements, but apply common sense and judgement in relation to treating customers fairly and putting them at the heart of what they do. The FCA has demonstrated that where it identifies that business models may be causing consumer harm, such as in the payday loan market or where a large proportion of customers are in persistent debt as identified by the credit card market study, it will take action to ensure that these particular types of credit, whilst profitable for businesses, are not resulting in bad customer outcomes.