Regulatory Update - May 2025
- Robert Bell
- 4 days ago
- 6 min read
A lengthy update, but worthwhile reading to ensure you're on top of your regulatory horizon scanning.
Replacing Consumer Credit Reports
In line with the FCA’s 5-year strategy and Annual Work Plan objective to become a smarter regulator, they have replaced two Consumer Credit Returns with a new, single, return for the following activities:
· Credit broking
· Providing credit information services
· Debt Adjusting
· Debt Counselling
The changes aim to support the streamlining of data collection, with the FCA conscious of collecting “only what is necessary for the effective supervision of firms, ensuring they can focus on high-value reporting that supports better consumer and market outcomes.” The new return features tailored questions, reflecting firms’ specific business models.
This should reduce impact on firms providing the information. Firms affected by these changes need to make sure they meet the requirements of the new rules, implementing the changes within the timescales set out in Appendix 1 Handbook Text.
CCA Reform
On 19th May 2025 the government released a long-awaited consultation on reforming the Consumer Credit Act 1974 and associated legislation. The consultation is open until 21 July 2025.
Due to the size and complexity of the task the consultation is split into two phases. This consultation is the first phase which “seeks views on the proposals in relation to information requirements, sanctions and criminal offences” (Consultation on Consumer Credit Act 1974 (CCA) Reform - GOV.UK). Phase 2 will set out how the Government intends to reform the scope of regulation and rights and protections under the CCA. Both must be carried out prior to implementation of any change.
We will follow up with an article early next week solely based on the CCA reforms proposed, watch this space.
Whistleblowing quarterly data
Data for Q1 2025 shows a slight decline in whistleblowing reports received from Q1 2024 and with the previous, October to December 2024, period. Thirty-six percent of reporters opted to remain anonymous, up from 30% in Q4 2024.
A total of 281 reports were received, containing 752 allegations. Compliance remains the top concern, with 184 allegations – in line with the 172 received in Q4 2024. 139 allegations were made against fitness and propriety, 94 of consumer detriment, 86 against the culture of the organisation and 82 against Consumer Duty breaches.
The FCA closed 468 whistleblowing reports in Q1 2025, taking ‘significant action’ (enforcement action, section 166 report, restricting firm permissions or individual’s approval) in 12 cases. Other action to reduce harm (writing to or visiting a firm, asking for information or asking a firm to attest to comply with the rules) was taken in 192 cases.
2024 Financial Lives Survey
The latest iteration of the FCA’s financial lives survey – carried out once every two years for the past 7 years – is the first conducted since the introduction of the Consumer Duty, and shows that while trust and satisfaction with the industry was generally positive, the FCA would like to see firms making it easier for customers to contact and deal with them and offering support of different kinds to consumers.
The survey found that the number of people with banking accounts had risen by around one million since 2020. Credit product use remains high, with deferred payment credit rising significantly, with use in 2024 particularly high among lone parents, women aged 25-34 and Black adults. High-cost credit use also increased by just over one percentage point. As many as one in ten UK customers have no cash savings.
Customers with characteristics of vulnerability continues to be a major theme. Although the percentage of UK customers with characteristics of vulnerability has decreased slightly since 2022 (from 52% to 49%), the survey’s findings confirm that as many as 1 in 2 customers could have one or more characteristics of vulnerability. One in ten have poor health and/or cancer, MS or HIV infection, with poor health higher among adults in a low-income household. 40% of these adults also had a mental health condition or illness.
Customers experiencing an income shock or relationship breakdown are most likely to report that this resulted in problems when dealing with their finances or with financial services.
Although the survey took place when the Consumer Duty was relatively new, it highlights the importance that firms continue to work proactively towards identifying vulnerability, using a range of support options, and taking action where outcomes for vulnerable customers aren’t as good as they should be. The survey data can also be used by regulated firms to inform their understanding of their customer base.
Delivering good outcomes for customers in vulnerable circumstances – good practice and areas for improvement
FCA expectations set out in the Financial Lives Survey should be read in light of the recent publication of its evaluation of firms’ treatment of vulnerable customers. The report found that most firms were unable to show how they effectively monitor and take action on outcomes for vulnerable customers, including not being clear on what good outcomes look like, having clear ways of measuring outcomes, and not escalating or making changes where needed.
The report includes best practice examples to inform firms’ regular assessments of compliance with the Duty, such as:
A lender who cross-referenced credit application rejection data by customer support needs found that customers with extra mobility needs were being automatically declined at a high rate, suggesting poor outcomes. The resulting investigation found that these customers, when stating that their main source of income was benefits, were automatically declined. The lender reviewed the policy.
Firms should be able to clearly identify and track actions to achieve good outcomes.
A firm had prompts based on real-time speech analytics that would automatically appear for frontline staff when a customer said a word or phrase that could indicate a potential characteristic of vulnerability.
A firm found its different channels had varying amounts of information available and that some customers may have found it hard to find the information they needed. The firm designed and distributed a consolidated A5-sized customer information poster with QR code links to relevant information.
Consumer Duty Reviews
The FCA continues to review firms’ compliance with the Consumer Duty. Heading into the third year following implementation, the FCA has made it clear that while it has seen evidence of good practice, a few areas of concern remain.
The issue of fair value has been highlighted in both the General Insurance Thematic Review and the Price and Value Outcome: good and poor practice update. Firms should be able to provide clear evidence that their products provide fair value, and good quality analysis and justification of pricing should be clearly based on this evidence. The types of customers likely to get value from the product should be carefully considered in the assessments, and if products have different features or target markets, they should be considered separately.
Outcomes continues to be an issue, understandably as the level of engagement in creating and assessing outcomes is new to the industry as a whole. The December 2024 Consumer Duty Board Report review was very positive about reports that included a clear outcomes focus, citing dedicated sections focused on each of the four outcomes, detailing what good outcomes looked like for customers holding their products. Conversely, the FCA would expect firms to do additional work where boards are failing to provide a good level of challenge around poor outcomes.
Fair treatment of vulnerable customers – particularly around their achievement of good outcomes – is a recurring concern. The Consumer Support Outcome: good practices and areas for improvement report suggested that where firms did not currently offer structured training for staff around how to support customers with non-standard needs and characteristics of vulnerability, they should do so as an area for improvement.
Data (Use and Access) Bill
This latest iteration of the UK’s update to its data protection regime has passed the House of Lords and is now in the final stages, having been passed to the House of Commons for the consideration of amendments.
The Bill has been updated several times since the previous form was introduced under the last government. This Bill aims to “harness the power of data for economic growth, support a modern digital government and improve people’s lives.” For firms, the Bill should make data processing easier, with some flexibility and added clarity.
The Bill will introduce ‘recognised legitimate interests’, which should offer clarity where previously there has been some understandable confusion over whether their own purpose for processing was, on balance, legitimate. Schedule 4 will set out what counts as ‘recognised legitimate interests’ for which a balancing test is not required. It will also offer clarity on when organisations can further process personal information, setting out purposes that are compatible.
Some additional clarity around automated decision making will also be welcomed by financial services firms; the Bill will reduce restrictions on decisions in low-risk scenarios, which will support wider AI use. This won’t apply to special category data; current restrictions will remain in place.
The Bill is expected to become law shortly with the main provisions expected to come into force in winter 2025/26.
Our Compliance Consultancy website includes a range of Consumer Duty tools, designed to support your compliance. Our updated Fair Value Assessment Tool provides assurance that true value has been thoroughly assessed and ensure that assessments are consistent, proportionate and actionable.
Our online training courses introduce new staff to regulatory requirements, key legislation and process, and offer excellent refresher training for established staff, with up-to-date scenarios and soft skills training. Our full range of e-learning courses are available online: Online Compliance Training | RB Compliance Consultancy
