On 17 March, the Financial Conduct Authority (FCA) published its Consumer Finance Regulatory Priorities Report for the consumer finance sector. This is the latest in a suite of nine sector-specific reports that have replaced the FCA’s longstanding portfolio letters. Directed at lenders, hire firms, credit brokers, debt advice providers, debt collectors, credit reference agencies, claims management companies and credit unions, the report is not light reading. Boards and Chief Executives are expected to engage with it directly and act where gaps exist.
The message to senior leaders is unambiguous: these priorities should drive strategic decisions, resource allocation and assurance activity.
The context: Credit is everywhere, but not for everyone
The FCA opens with a striking set of numbers. As of May 2024, 79% of UK adults held at least one regulated credit agreement. Yet in the two years prior, 3.2 million adults had credit applications declined and 45% of those individuals could not access the credit they needed at all. This tension between the ubiquity of consumer credit and the exclusion of millions from it sits at the heart of the report’s three core priorities.
The FCA’s three consumer finance priorities and what they really mean
The report sets out three headline priorities where senior leaders should focus their attention:
- Consumers can access credit that meets their needs
The FCA expects firms to lend responsibly, design products that deliver fair value, and actively consider how they can serve consumers who are currently excluded from mainstream credit. This is a balance that requires genuine thought about how credit decisions are made.
While the regulator supports innovation, including the use of alternative data sources such as open banking to expand access and better serve customers with limited or no credit histories, it is clear that access must not come at the expense of suitability or consumer outcomes. At the same time, the FCA is also undertaking its own reform work this year, including a review of its regulatory framework alongside Consumer Credit Act reform, a review of the high-cost-short-term credit price cap, and a forthcoming consultation on CONC chapter 3 covering financial promotions and communications.
For boards, the key question is no longer “are our policies compliant?” but “does our affordability and risk assessment processes inadvertently exclude customers who could be served responsibly?”
The FCA’s Innovate function is available for firms exploring new data sources, and the CONC chapter 3 consultation will be one to watch closely as it seeks to modernise how firms communicate credit products to consumers.
Whatever actions firms take, firms must still demonstrate that credit decisions consistently meet consumers’ needs and deliver fair value in practice.
- Firms must support consumers who struggle with debt
The FCA is explicit that support for consumers in financial difficulty is not consistently effective across the market. Its Financial Lives Survey found that of the 1.3 million credit holders who received payment support in the two years to May 2024, 23% were unable to find a support option that suited their circumstances. That is a material failure rate for a system that is supposed to help people at their most vulnerable.
As such, the FCA expects firms to remove unnecessary barriers to forbearance, ensure debt advice is tailored to individual circumstances, and communicate clearly so consumers can make timely, informed decisions. This also means firms must ensure that their outcomes monitoring and testing frameworks can assess and evidence how customers in financial difficulty are actually being served, given the regulator will increasingly test customer journeys and outcomes, not just policy design.
- Consumers can complain and receive appropriate redress
Complaint handling remains a core supervisory focus. The FCA expects firms to properly identify, record and analyse complaints, undertake robust root‑cause analysis, and hold sufficient financial resources to meet potential and actual liabilities.
This is particularly significant given ongoing and potential redress activity across the motor finance sector. Here the message is clear: prepare to work constructively with the FCA on a redress scheme once the final rules are published. Claims management companies are also in scope: the FCA expects them to deliver high-quality, fair value services that genuinely help consumers, not add friction or extract value from the process.
Consumer Duty: the thread running through everything
Although the report is not branded as a “Consumer Duty update”, the FCA makes clear that Consumer Duty compliance sits at the centre of its expectations for consumer finance firms.
In practice, this means boards should expect the FCA to ask:
- How are you monitoring, testing and evidencing outcomes across the customer lifecycle?
- What management information demonstrates that customers receive fair value?
- How quickly and effectively do you identify and address emerging harms?
Firms that treat the Regulatory Priorities report as a compliance checklist risk missing the point. The FCA is looking for evidence of embedded, outcome‑focused decision‑making.
What boards and senior executives should be doing now
The FCA is clear that these priorities require action, not awareness. Firms are already starting to use the report to:
- Undertake structured gap assessments against the three priorities
- Refresh outcomes monitoring and testing frameworks to ensure board and committee MI (including the annual Consumer Duty Board Report) evidences outcomes, not activity
- Stress‑test Consumer Duty implementation and embeddedness particularly in credit decisioning, forbearance and complaints
- Re‑prioritise assurance activity toward areas of highest potential consumer harm
Crucially, this is not about introducing new processes for their own sake. It is about ensuring that existing frameworks work in practice and stand up to supervisory scrutiny.
Final thought: a board‑level regulatory agenda
The FCA has deliberately positioned the Consumer Finance Regulatory Priorities report as a strategic document. For boards and executive teams, it provides a clear line of sight into where regulatory challenge will land and where evidence will be demanded.
Firms that act early, align their governance and assurance activity to these priorities, and can clearly articulate how they deliver good consumer outcomes will be best placed to navigate the year ahead.
Those that do not may find that the FCA’s promise of “stronger, faster action where harm is greatest” arrives sooner than expected.
How Square 4 can help
At Square 4, we work with boards and executive teams to turn regulatory expectations into clear, practical and proportionate action.
We support consumer finance firms to:
- Translate FCA priorities into board‑level assurance questions
- Assess whether governance, MI and controls evidence good outcomes in practice
- Identify gaps before the regulator does and prioritise management action
- Strengthen Consumer Duty outcomes monitoring and testing without over‑engineering solutions
If you would like to discuss any aspect of this paper and how we can help, please contact us at hello@square4.com
Darren Fisher
Senior Advisory Director
