Consumer Credit – new reporting requirements
In September, the FCA published a proposal to introduce three Product Sales Data (PSD) returns. The new requirements, to be part of Chapter 16 of the Supervision Manual (SUP 16), will mean consumer credit lenders reporting more than £500k in outstanding balances or new advancements will need to report detailed data once a quarter.
The FCA foresee benefits to the regulator and to firms, with the FCA gaining the ability to analyse recent data to pick out trends or harms, and firms better able to plan for sharing the type of data that would be required if the FCA identified concerns on an ad-hoc basis.
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The underlying aim of the changes is the early identification of irresponsible lending practices that cause consumer harm. Collecting Product Sales Data will go a step further than the current, aggregated data for regulated consumer credit activities currently allows. Firms will need to provide “detailed information on the initial sale, and ongoing performance, of individual agreements.”
In particular the FCA will use the information supplied to gain insight into business models and products, processes used to assess affordability risk, levels of fees and charges, product sales and demographics, and arrears and default data.
The data will help the FCA to monitor whether firms are delivering good customer outcomes, and the more granular borrower and affordability data could highlight where firms are failing to properly assess affordable lending, particularly to vulnerable customers. This will help the FCA identify harms quickly as well as monitoring trends over time across products, firms, and the market.
The proposal will introduce three new returns:
Sales PSD
Performance PSD
Back Book PSD
The FCA points out that regular, expected collection of this data is preferable to ad-hoc or alternative methods of data collection, and is less intrusive for firms. This should have the benefit of reducing unscheduled data collections “significantly.”
Sales and Performance PSD to be reported include ‘agreement level information’ relating to regulated consumer credit agreements, but not agreements relating to overdraft facilities and credit agreements secured on land. Data will be collected quarterly – the exact dates will depend on the type of business. It will include all data up to the point an agreement is cancelled, terminated, or the firm is no longer the legal owner of the debt.
The requirement will apply to all lending firms which reported more than £500k in outstanding balances for relevant credit agreements at the end of the previous annual reporting period and /or more than £500k in new advances for relevant consumer credit agreements. Once a firm first meets that threshold, they will be expected to continue reporting to avoid firms coming into and out of the reporting schedule.
Data items will include Lender details, transaction data, agreement details, third party details, sales details, end of agreement, purpose of borrowing, security, borrower details, guarantor, affordability (I&E details), information about charges and fees (periodic, usage, interest and penalty), arrears and forbearance, benefits (including promotional rates and incentives, statement details, scheduled payment, use of credit and default notice.
High-cost short-term credit firms were already required to submit much of this data, which will now fall under the general requirements of consumer credit lenders for the purposes of SUP 16. Lenders will need to submit sales and performance data on a quarterly basis and back book data as a one-off submission.
The proposed text suggests that the new rules – if unchanged by the consultation process – will apply from 1 January 2025, with sales and backbook data required from that date, and performance data required from 31 March 2025.
The FCA has not yet finalised how collection will happen, but its preferred option at this point is via RegData. The final decision will come in the final Policy Statement.
The final Policy Statement is due to be published in Q1 2024.
The FCA’s continued focus on fair treatment of vulnerable customers and the achievement of good outcomes means that staff training on this subject is more important than ever. We offer a dedicated online training course on the Fair Treatment of Vulnerable Customers. Priced at just £20 per user, the course is accessible at the delegate’s convenience and provides a certificate upon successful completion, allowing firms to track and record each user’s progress.
For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.
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