FCA consults on streamlining regulatory requirements

Lenders and brokers have until the end of October to make their views known on two Financial Conduct Authority (FCA) consultations, both designed to streamline administrative burdens. One is a review of the regulator’s retail conduct rules following the introduction of Consumer Duty, while the second is a proposal for a new regulatory reporting return for consumer credit firms engaged in the regulated activities of credit broking, debt adjusting, debt counselling and providing credit information services. 

The retail conduct rules review comes in the wake of the introduction of the Consumer Duty, with the FCA saying this provides an opportunity for the regulator to remove detailed and prescriptive requirements that cover similar issues, and where similar customer outcomes could be achieved with greater flexibility, in order to give firms scope to adapt and innovate.

The FCA says this change of approach would allow it to meet its new secondary objective of facilitating the international competitiveness of the UK economy, including the financial services sector, and its growth in the medium to long term.

The proposed new regulatory reporting return for consumer credit firms is intended to enable the FCA to collect better quality information from firms which the regulator says “will enhance our ability to identify risk of harm and intervene quicker.”

The regulator says the existing returns, designed in 2014, are general in approach and attempt to apply the same questions across all business models, leading to misinterpretations and inconsistencies.

The proposed new return will work on a “branching logic” approach, with a series of questions about the way firms operate, engage with consumers and use the regulated activities for which they hold permission.

In future, all firms in scope will be asked to respond to five mandatory sections of questions, including:

• Permissions – the regulated activities firms have undertaken in the past 12 months.
• Business model – the financial products, goods, and/or services that firms are providing.
• Marketing – the channels firms are using to target consumers.
• Revenue – total revenue from credit-related activities and non-credit related activities.
• Employees – the number of employees and incentive and remuneration arrangements. 

After answering these questions, firms will be presented tailored questions specific to the relevant permissions they hold.

The FCA says its new approach to gathering information will mean firms “benefit from simplified returns and less ad hoc data requests”.

However, the regulator’s own analysis suggest in-scope firms will be shouldering additional compliance costs. The FCA estimates these include total one-off costs across all firms of £18.3m associated with familiarisation and gap analysis and £27m for IT and change project costs.

The FCA says it also estimates total ongoing costs (per annum) of £2.3m – in excess of what is currently spent responding to data collections this return will replace – for firms to collate and report the required data.

Both consultations close on 31st October, with final policy statements expected in Spring 2025.

“Clarity about the information the regulator requires is helpful, but hikes in compliance requirements and resources should be avoided where possible.

“The new government has made fixing regulation a priority, and has said it will discourage interventions that might inhibit investment and growth, and it’s important that the FCA strikes the right balance here.

“A similar effort is underway in the EU with Judith Arnal Martinez, a senior research fellow at the Centre for European Policy Studies (CEPS) calling at last week’s Leaseurope’s conference for regulatory simplicity particularly in areas like digital finance and sustainability. Martinez linked bad regulation to a range of poor economic indicators relative to the lighter touch US market.

“The next AFC conference in November will focus on the likely impact of the new UK Government on the auto, equipment and asset finance industries and we will be exploring this issue in more depth then.”

Find out more about AFC’s November conference here.