This review will look at how consumer credit firms pay and incentivise their staff and manage the risks arising from these reward arrangements.
This thematic review focuses on staff remuneration and incentives, covering a broad range of consumer credit sectors and firms where consumer credit is secondary to their main business.
The purpose of our review is to understand the nature of staff incentives, remuneration and performance management arrangements in the consumer credit market. We will focus on the risks that can arise and how firms control and mitigate those risks. We will seek to examine good and poor practices.
Supervisory work that we have carried out on other issues suggested many consumer credit firms may be operating high-risk incentive schemes, which can often lead to poor consumer outcomes if not managed effectively.
Additionally, work carried out by the FSA/FCA between 2012 and 2014 found a number of firms (including banks and insurers) had schemes that were likely to drive mis-selling. High level findings from this previous work were:
We will seek to understand if similar or new issues are also present across the consumer credit sector.
This review will be of interest to all consumer credit firms we regulate and relevant trade bodies. Consumers and consumer groups may also be interested in this piece of work.
Our approach to this work is as follows:
Firms included in the review cover a broad range of consumer credit sub-sectors and cover a mix of business sizes, including both firms who sell to – and collect from – consumers.
The review work will take place throughout the remainder of 2015 We undertook our stage 1 review work and stage 2 visits in 2015 and early 2016, with the findings at each stage shaping our approach going forward. We will publish the results of our analysis in Summer 2016.
The previous FSA/FCA pieces of work are as follows:
Performance management guidance has been published and will also have some cross-over with the review.
Copyright © 2016 FCA. All Rights Reserved.