FIMC has submitted a response to the Financial Conduct Authority (FCA) consultation on reviewing the financial promotions rules for consumer credit. The submission can be found here: FIMC FCA Fin Promotions CP26-15 0626
We cautioned against relying too much on the Consumer Duty and removing some important specific provisions in CONC – the Consumer Credit sourcebook that sets out the FCA’s expectations for firms involved in consumer credit and debt related activities.
We think it is beneficial, in certain circumstances, retaining specific CONC provisions even if the FCA thinks the Consumer Duty would produce the same outcomes. This would provide firms with greater certainty as to what the FCA expects.
FIMC experience is that many firms struggle with being given too much discretion and prefer the certainty of prescriptive rules and guidance. Allowing firms to use different formats, rather than aid consumer understanding, could cause confusion and make it more difficult for consumers to shop around so hindering effective competition.
Clear, prescriptive rules on how, where, and when key pieces of information are disclosed is not at odds with firms using different channels of distribution to communicate with consumers. Nor does prescription prevent or limit genuine innovation.
Relying too much on the Duty and giving firms significant discretion on promotions and disclosures would actually make it more difficult for the FCA to supervise market practices and behaviours.
We support the proposal to retain the rule in CONC 3.3.1R relating to the clear, fair and not misleading requirement so that the private right of action remains.
We very much welcome the FCA’s measured approach to the annual percentage rate (APR). Further analysis and deliberation is required before any decisions are reached. Our view is that the APR should definitely be retained and supported with additional cost metrics. Moreover, firms should be mandated to inform potential borrowers what rate they are likely to get at the soft search stage.