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Consumer Credit – Product Sales Data Reporting
In late April, the FCA published the final rules and guidance for the introduction of three new Product Sales Data returns into SUP 16.
The new PSD returns will ask firms to provide more detailed information on the initial sale and ongoing performance of individual agreements. The FCA plans to use the data to gain more insight into the market, to be able to intervene “more quickly and boldly” where they identify risk of harm.
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The good news is that the additional data should reduce the need for ad hoc information requests, meaning that it will be much easier to foresee resource requirements in future.
The three new returns are:
Sales PSD
Performance PSD
Back book PSD
The Sales and Performance data will be required on a quarterly basis, and will include core agreement data, borrower and affordability data, charges and fees and arrears and forbearance.
On the basis of the feedback received as part of the consultation, the FCA will be making some changes to the initial proposals.
The threshold for firms to report PSD will now be £2m in outstanding balances and/or new advances, up from £500,000, to reduce reporting burden on smaller firms while maintaining coverage of the markets as a whole.
The proposed implementation period has been extended. Large firms (£20m plus) will have 14 months and small firms (£2m-£20m) will have 20 months.
The final rules and guidance also provide more clarity around data definitions, and the removal of some data elements from the return, although the overall number of data elements has increased across the three returns “to better align with the range of practice across industry and particularly the different types of products offered.”
The detailed information that the new returns will provide will enable the FCA to get a clear picture of how lending products perform for customers. They are interested in understanding how product features impact on consumer outcomes, both individually and where they combine with other product features. This will allow the FCA to build up an evidence base to take action where they see issues across firms offering similar products.
The FCA highlights that more detailed, up to date data, will also support firms with clarity on outcomes that would not be possible from limited information.
The publication sets out the changes to the data elements that will be required by the final rules:
There were concerns about some of the data fields not being relevant for some credit products. The FCA responded that firms should align their response as closely as possible, given the data they already collect, clarifying that they do not expect firms to collect data covering every option or significantly increase the information required in applications from consumers.
The data elements have been amended to support firms in understanding what is required and the granularity of the information required, in line with the information they currently collect and store.
New data elements will separate the information of borrowers from the information of guarantors.
Separate performance data elements for defaulted agreements.
Additional validation of some elements to display them where appropriate, e.g. where the firm has deemed it disproportionate to collect certain elements of information from the customer.
Removal of some data elements where challenges in providing the information outweigh the intended benefit in collecting it.
The inclusion of additional guidance to improve clarity and avoid misinterpretation of the data elements being requested.
Additions to the lists of options to enable a wider range of firms to report accurately in line with their existing categorisations.
The feedback highlighted firms’ concerns about historic back book data. The FCA has responded that the back book PSD is “intended to collect sales data as a ‘one off’ PSD return for all relevant regulated credit agreements that are active at the beginning of a firm’s first reporting period. It is not intended to collect information on historic agreements that are no longer active.”
To prepare, firms should now check which threshold their firm falls within, then check the category, and identify the reporting periods and due dates that apply to the firm to begin preparing for the first return.
The actions the FCA are taking to analyse outcomes highlights just how seriously they are taking the Consumer Duty. Getting staff up to speed with the background of the Duty, understanding good customer outcomes and how to support them and providing them with the range of skills they need to offer that support in practice – particularly to vulnerable customers – is a great starting point to ensure compliance.
Our online training course, priced at just £20 a head, takes staff through the basics, explaining how the Duty works, what it expects and what it will mean for them.
Our popular range of Consumer Duty compliance resources – including webinars and downloadable content including product review templates – are available to browse and buy here: Consumer Duty Compliance Resources | RB Compliance Consultancy
