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Skilled Persons Reviews: An update for Consumer / Retail credit lenders and intermediaries

  • United Kingdom
  • Consulting
  • Financial services and markets regulation
  • Financial services and markets regulation - Briefings and articles
  • Financial institutions

17-02-2016

Last year (as at 31 October 2015), the FCA and PRA commissioned a total of 28 Skilled Persons reviews. These figures are likely to increase in line with 2014/15 as the regulators publish more data for the remainder of this financial year. It is reasonable to expect that the FCA and PRA to continue with their use of Skilled Persons report as a supervisory tool. 

What is noticeable is the increase in numbers of Skilled Persons reviews commissioned in the consumer credit sector, some of was driven primarily from Debt Management and High Cost Short Term Loans firms. Looking across the horizon, one could reasonably expect the FCA to continue to use Skilled Persons reviews to assess the TCF and conduct risks present within this sector.

The key themes from the reviews commissioned in 2015 were, and given the speeches made by the FCA we can reasonably expect these areas to be subject to continued focus:

1) Conduct - the ability of a firm to manage its conduct risks effectively

2) TCF - a firm's ability to treat customers fairly and be able to demonstrate senior management commitment to this aim

3) Affordability - a firm's assessment of affordability and sustainability of loans made

Going, forward our view of the themes the FCA will focus on are:

1) Financial promotions

2) Continued focus on use of Management Information to affect change

3) Arrears Management and Collections activity

4) Sales Processes and staff competence

5) Approved persons

6) Complaints Handling

 

Of course there could be many areas which the FCA seek to review (via a Skilled Person review), but the message is clear - customers are at the heart of the FCA agenda, and therefore the FCA expect firms to put the customer at the heart of their business. Any area or practice which could lead to poor customer outcomes are potentially an area for Skilled Persons activity, particularly if the firm in question is dealing with vulnerable customers.

What can you do to minimise the requirement of a Skilled Person review?

1) Review your business against FCA expectations (rules and themes) - are there gaps?

2) Set about remedying the gaps (ahead of any potential FCA intervention)

3) Ensure all relevant staff understand the FCA regime and what this means to them in their role

At Eversheds we have a combined team of lawyers and regulatory consultants who are experts within consumer credit, and have managed various Skilled Persons reviews. We have the benefit of expertise across legal and compliance matters which enables us to review a business to help identify areas of concern. Our view is that proactive work done by a firms goes a long way to managing the likelihood of a Skilled Persons review, i.e. if you've identified your areas of improvement then the FCA would have to think twice before commissioning a Skilled Persons review in that area.

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