FCA’s new ‘resilience return’ could cost consumer credit firms £1.5m
Proposals to extend the City watchdog’s new “resilience regulatory return” to fully authorised consumer credit firms could result in a £1.5m annual bill for the industry and lead to higher costs for consumers.
The Financial Conduct Authority (FCA) is planning to introduce a quarterly data survey for most regulated firms, replacing ad-hoc data collection such as the financial resilience survey. It says this will lessen the administrative burden on firms by standardising the data collection.
The aim of the new regulatory return is to reduce harm from firm failure, by quickly assessing financial resilience risks.
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It published a policy statement yesterday following the closure of its consultation into the new regulatory return, which will be known as ‘FIN073 – Baseline Financial Resilience Report’.
Respondents to the consultation included peer-to-peer lending platforms CapitalStackers and Invest & Fund.
The policy statement applies to all FCA-regulated firms with a few exceptions including credit brokers.
The FCA has now opened a consultation into whether to change the exclusion of credit broker to “a firm with limited permission”. The proposed change would bring all full permission consumer credit firms in scope of FIN073.
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“A significant proportion of full permission consumer credit firms primarily undertake financial services activity, presenting a higher risk to our objectives,” the FCA said in the consultation. “We consider that it is important for us to have up-to-date baseline financial resilience information for these firms. We propose to bring these firms in scope of FIN073 so we can receive baseline financial resilience information on a permanent basis. The change would also ensure that the consumer credit firms that remain out of scope are easily identifiable based on their permissions.”
The FCA says without extending the remit, around 2,300 full permission consumer credit firms would remain out of scope of FIN073.
Consumer credit firms would collectively face a one-off cost of £1.3m, the FCA estimates, followed by an ongoing annual cost of £1.5m. These would include IT costs and additional staff costs to familiarise themselves with the report and to collate and report the data to the FCA.
“We believe that our proposals in this consultation paper will have a net cost in the short to medium term while the benefits (such as reducing the potential for disorderly failure) are ongoing and will likely compound over time,” the FCA said.
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The regulator does not expect the proposals to lead to direct costs to consumers. However, it said that firms could use the information in FIN073 to make themselves more financially resilient, such as increasing their fees or changing their payment terms, which would indirectly raise costs for consumers.
The FCA is asking for comments on its proposals by 6 June 2023. Following this consultation, it will consider the feedback and publish a statement in summer 2023.