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FCA issues warning to CEOs of almost 28,000 credit consumer firms in light of the cost of living crisis

24 May 2022

On 6 May 2022 the Financial Conduct Authority (FCA) issued a letter to almost 28,000 firms providing credit broking services or high cost lending products. Noting the fact millions are facing the biggest cost of living crisis in more than a decade, the FCA unambiguously reminded consumer credit firms they have a responsibility to not exploit these circumstances.

The FCA highlighted the reality that it expects to see a greater demand for credit whilst providing an apt warning that it will be keeping the sector under close review to avoid unsustainable and unaffordable lending. 

It clearly expects authorised firms to ensure that financial promotions are clear, fair, and not misleading – as well as compliant with the rules set out in its Consumer Credit sourcebook (CONC 3). Drawing attention to unacceptable practices, the FCA noted that it has identified promotions: 

  • using terminology such as ‘no credit check loans’, ‘loan guaranteed’, ‘pre-approved’, or ‘no credit checks’ which may be true of credit brokers but could falsely lead consumers to believe the lender will not check credit status at all;
  • offering brokerage or direct lending services for high-cost short-term credit without the required risk warning (“Warning: Late repayment can cause you serious money problems. For help go to”);
  • failing to include the representative APR; and
  • by credit brokers, failing to state they are brokers rather than lenders, 

all of which may breach the rules under CONC 3. 

While the FCA recognised that some advertising media may appear to create challenges to meet FCA requirements, the FCA considered that their rules were generally media neutral and it was possible to comply with them irrespective of character limitations. 

Additionally, the FCA reminded firms they must also comply with the CAP Code administered by the Advertising Standards Authority (ASA). Furthermore, the FCA quoted the ASA advice on short-term and payday loans, which clearly states the need for marketing to be socially responsible. The ASA advice also clarifies that the ASA’s assessments of ads is likely to consider undue emphasis on speed, ease of access, targeting of vulnerable groups, and whether an ad may trivialise taking out a loan. Each assessment may turn on its facts, but this advice does provide clear guidance firms should consider to avoid falling foul of the CAP Code. 

Despite listing issues it had identified, the FCA was clear this list should not be considered exhaustive. The FCA suggested that firms should review their financial promotions to ensure that they comply with CONC 3, review systems, processes, and controls for financial promotions to ensure they are sufficient to comply with CONC 3, and draw the letter to their Board’s attention. 

The FCA will be proactively monitoring the market to assess compliance and it expects firms to put their customers’ interests at the heart of their business – including when drafting their financial promotions. 

Firms should take this letter as both illustrative guidance on some key areas on the FCA’s radar as well as an unequivocal warning that, in light of current economic circumstances, action will be taken against firms failing to comply with their rules.  


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