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Consumer finance regulatory news, 24 January 2020

FIG Bulletin

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Recent regulatory developments of interest to financial institutions.

Contents

Mortgage prisoners: FCA calls on larger lenders to offer modified affordability assessments 

Following its policy statement on changes to the responsible lending rules, the FCA has published a new webpage on Understanding mortgage prisoners, giving further data on the mortgage prisoner population.

The FCA wants as many lenders as possible to offer the modified affordability assessment. It says that evidence so far has shown little desire from larger lenders to adopt the changes. It encourages more lenders to step forward and offer products to mortgage prisoners in the coming three months.

Repeat lending: FCA creditworthiness rules 

In its latest regulation round-up for January 2020, the FCA gives some clarification to firms on repeat lending in the high-cost short-term credit (HCSTC) market.

The FCA states that there has been some debate in the HCSTC market about how its creditworthiness rules should apply to repeat lending. The FCA explains that, other than for rollovers, its rules do not prevent firms from issuing more than a particular number of loans to a customer per se. However, they would need to comply with the FCA's creditworthiness rules in doing so, including assessing the affordability risk to the borrower. The FCA says that this is a view shared by all relevant bodies, including the FOS.

The FCA reminds firms of its October 2018 Dear CEO letter, sent to all HCSTC firms. In that letter, the FCA highlighted the risks in relation to repeat borrowing as it could indicate a pattern of dependency on HCSTC that is harmful to the borrower. It says that rigorous affordability assessments are key to avoiding harm in this area, and firms should ensure they are making proportionate and responsible assessments of the sustainability of borrowing.

Credit unions: FCA speech 

The FCA has published a speech by its chair, Charles Randell, "Is this the decade of the credit union?", in which Mr Randell made the following key points:

  • community-based lending is a key part of growing the supply of affordable credit;
  • accelerating the growth in credit union membership requires a transformation of the sector; and
  • credit unions need governance that is equal to this transformation challenge, while continuing to protect consumers and prevent financial crime.
Loyalty penalties: CMA 12-month progress update 

The Competition and Market Authority (CMA) has published a 12-month progress update following the investigation into the loyalty penalty super-complaint submitted by the Citizens Advice. During the investigation substantial loyalty penalty was identified in the mobile, broadband, household insurance, cash savings and mortgages markets. The update sets out the progress made by Ofcom, the FCA, the CMA and the government based on the CMA's previous recommendations.

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Authored by Yvonne Clapham

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