FCA consumer finance regulatory priorities

The credit sector is one of the UK's most varied markets, with over 45 million people using credit. It finances consumption, smooths household cash flows, and underpins economic growth.

Yet it is also a sector where things go badly wrong for millions of consumers each year - where unaffordable lending, inadequate forbearance and a dysfunctional redress system can cause lasting harm.

The FCA has now published its inaugural Regulatory Priorities report for consumer finance - replacing the portfolio letter model that has governed supervisory communications for many years. More than 40 portfolio letters have been consolidated into a single, sector-wide document, published annually, designed to act as a clear, succinct one-stop shop. It is addressed squarely at Boards and Chief Executives, who are expected to read it carefully, review the priorities within it, and act where they need to.

The direction of travel is unambiguous: less intensive attention on firms doing the right thing, and stronger, faster action where harm is greatest. This briefing sets out the three headline priorities, identifies what is genuinely new in the FCA's thinking, and offers practical steps firms should take now. It applies to lenders (including debt purchasers), hire firms, credit brokers, debt advice providers, debt collectors, credit reference agencies and credit information service providers, claims management companies, and credit unions.

Priority 1: Consumers can access credit that meets their needs

Applies to: Lenders, credit brokers, credit reference agencies, and credit information service providers.

The FCA wants a credit market that works well, helps consumers, and supports economic growth. The data, however, reveals that significant numbers of consumers are failing to access the credit they need. The FCA's Financial Lives 2024 survey found that 79% of UK adults held at least one regulated credit agreement in May 2024, but 3.2 million adults had applications for regulated credit declined in the two years to May 2024 - and 45% of those declined (1.4 million people) could not get the credit they needed at all.

The FCA expects firms to lend responsibly, continuing to offer well-designed credit products that are fair value and meet consumers' needs. Firms should also consider how to help currently excluded consumers –  whether through innovation and new products, budgeting tools, eligibility checks for grants and benefits, or referrals. Firms may also find alternative data sources, such as open banking data, helpful in lending decisions for consumers with limited or thin credit histories.

What is new

The FCA's previous portfolio letters focused primarily on conduct standards within the existing regulatory framework - keeping firms in line with rules already written. The tone here is materially different. The FCA will review the entire regulatory framework, alongside the government's reform of the Consumer Credit Act, to ensure it delivers a modern, outcomes-focused regime that supports innovation and good consumer outcomes. This is not supervisory maintenance – it is active redesign. 

The FCA has consulted on remedies under the Credit Information Market Study to improve the quality, coverage, and consistency of credit information, with particular benefit for those with thin credit files. The FCA will also review the high-cost short-term credit price cap - a concrete intervention not previously signalled. There is also a specific commitment to support the government's Financial Inclusion Strategy and the growth of the mutuals sector. Together, this represents a shift from the FCA as rule-enforcer to the FCA as market architect.

Practical steps for firms

• Review whether your product range genuinely meets the needs of excluded consumers and assess whether open banking data or alternative sources could improve credit decision-making for those with thin files.
• Engage with the government's Consumer Credit Act reform process and the FCA's framework review - early engagement will allow your firm to shape the outcomes-focused regime that replaces it.
• Respond to the Credit Information Market Study proposals; the remedies will affect how credit decisions are made across the market and your firm's competitive position within it.
• Monitor the high-cost short-term credit price cap review and assess how any change to the cap will affect your business model.
• Explore the FCA's Innovate function and sandbox services for propositions designed to expand financial inclusion, particularly in the mutuals sector.

Priority 2: Firms support consumers who struggle with debt

Applies to: All firms with consumer credit permissions.

Despite more people seeking debt advice, many consumers remain financially vulnerable and feel burdened by debt. Not all consumers are getting the support they need, and the FCA retains concerns about whether current support is as clear and helpful as it needs to be. The data underlines the scale of the problem: of the 1.3 million credit holders who received support from one or more lenders in the two years to May 2024, 23% disagreed that they were able to select a support option that suited their needs.

The FCA expects firms to provide appropriate and accessible support for consumers, acting proactively to help borrowers in financial difficulty without unnecessary barriers. Debt advice must be appropriate to consumers' circumstances and must include clear communications so that consumers can make well-informed decisions at the right time.

What is new

Previous FCA portfolio letters acknowledged forbearance as a compliance obligation – firms were expected to have it; the FCA would check. What has changed is the level of ambition and the collaborative posture. 

The FCA is now prioritising better outcomes for consumers in financial difficulty by working actively with firms to improve forbearance, support, and the quality of debt advice, using the Consumer Duty as the lever for driving improvements. The express commitment to deploy the Duty to raise standards in forbearance and debt advice quality is a meaningful escalation – the Duty is no longer simply an overarching standard to be demonstrated; it is the tool the FCA will use to force improvement in specific conduct areas.

The FCA will encourage firms to improve support for consumers in financial difficulty, with a particular focus on creditor behaviour and advice quality, and will continue working with the Insolvency Service and Recognised Professional Bodies to raise standards and tackle harm in the debt advice market. The involvement of the Insolvency Service marks a cross-authority dimension that has not featured prominently in previous consumer finance portfolio letters.

Practical steps for firms

• Audit the pathways through which consumers in financial difficulty can access support - identify and remove barriers that create unnecessary friction or delay.
• Review the quality and clarity of communications to consumers in financial difficulty, ensuring they are not merely process-compliant but are genuinely enabling informed decision-making.
• Assess your forbearance framework through the lens of the Consumer Duty – the FCA will use the Duty to drive improvements and firms that have not self-assessed first will be on the back foot.
• Debt advice firms should engage now with the FCA's work with the Insolvency Service and Recognised Professional Bodies – firms that cannot demonstrate high-quality, appropriate advice face regulatory and reputational exposure from multiple directions.

Priority 3: Consumers can complain when things go wrong and get appropriate redress

Applies to: All firms with consumer credit permissions.

Trust and confidence that the redress system is fair and consistent is vital. Markets and firms need clarity and predictability to build confidence. Motor finance dominates this priority – but the FCA's message is wider than one product line, and every consumer credit firm should pay attention.

Firms must properly identify and deal with complaints, keep adequate records, undertake root cause analysis, and hold sufficient financial resources to meet potential and actual liabilities. Motor finance firms in particular should prepare to work constructively with the FCA on a potential redress scheme, designed to address liabilities for those treated unfairly and to bring certainty to consumers, the market and investors.

Claims management companies should deliver high-quality, fair-value services that help consumers pursue legitimate claims, with robust client-sourcing and onboarding processes, no misleading financial promotions, and only complaints with genuine merit progressed.

What is new

The FCA's previous messaging on complaints handling was largely process-focused - firms should have appropriate systems, deal with complaints fairly, and escalate to the Financial Ombudsman Service where required. This report signals three material escalations.

First, the FCA has consulted on implementing a motor finance redress scheme - and expects to publish final rules by late March 2026 if it proceeds. A formal, mandatory redress scheme of this kind - designed to bring systemic certainty rather than manage complaints case by case - is without precedent in the consumer finance sector. 

Second, the FCA is working with the Financial Ombudsman Service and the government to implement reforms to modernise the redress system itself - not just the individual firm-level processes.

Third, the FCA will actively monitor CMC financial promotions, tackle unfair exit fees, misleading advertising and sign-ups, and address multiple representation – an enforcement agenda towards a sector that has itself grown rapidly in the shadow of motor finance. The FCA will also continue to use data to identify firms at risk of avoiding redress liabilities, with a specific focus on detecting indicators of phoenixing.

Practical steps for firms

• Conduct an immediate review of complaints records, root cause analysis processes, and financial provisioning - insufficient reserves against potential liabilities is a risk the FCA is watching for.
• Motor finance lenders and administrators should prepare now for the potential redress scheme - do not wait for the final rules before assessing the population of affected consumers and the likely financial impact.
• CMCs should review all financial promotions, client onboarding processes, and exit fee structures against the FCA's stated enforcement agenda - the FCA is actively monitoring the sector.
• Any firm that has changed corporate structure since incurring potential consumer credit liabilities should take urgent legal advice on how the FCA's phoenixing detection work may affect it.

Additional areas requiring attention

Beyond the three headline priorities, firms should note the following:

• Buy now pay later: Following government legislation bringing interest-free BNPL products from third-party lenders into FCA regulation, final rules have been published and take effect on 15 July 2026. Firms will need to operate to high standards and deliver good consumer outcomes; those without current consumer credit permissions must notify the FCA for the Temporary Permissions Regime ahead of Regulation Day.

• Consumer Duty and appointed representatives: The appointed representative population in consumer finance has grown faster than in other sectors. The FCA reminds principal firms that weak oversight risks failing their Consumer Duty obligations. The FCA is using data to target supervisory resources on the highest-risk principals and their appointed representatives.

• Data-driven supervision: The FCA will analyse improved credit regulatory returns data to make quicker, more targeted interventions and to assess how the market is functioning. Firms doing the right thing can expect lighter supervision; outliers can expect swift and appropriate action.

• AI: The FCA encourages firms to experiment with AI and to use its sandbox services and Innovation Pathways, including the Supercharged Sandbox for smaller market participants. An AI Live Testing evaluation report will be published by the end of the year.

• SMCR reform: Working with HM Treasury and the PRA, the FCA is reviewing the efficiency and effectiveness of the Senior Managers and Certification Regime with the aim of halving its regulatory burden.

• CONC chapter 3: The FCA will consult on its rules in Chapter 3 of the Consumer Credit Sourcebook covering financial promotions and communications, seeking to remove unnecessary prescription, update requirements, and improve alignment with the Consumer Duty, in order to increase consumers' confidence when seeking products and services that meet their needs.

• Smaller firms: The FCA is piloting a new approach to help smaller firms in the consumer finance market understand its regulatory expectations, to be launched this year.

Conclusion

The FCA's inaugural Regulatory Priorities report for consumer finance is more than a reformatted version of familiar supervisory instructions. It is a statement of regulatory intent from a regulator that is simultaneously more ambitious in reshaping the consumer credit market and more forensically focused on outcomes than any portfolio letter communicated.

The three priorities - access to credit that meets consumer needs, meaningful support for those struggling with debt, and a functioning and trustworthy redress system - map directly onto the areas where the FCA has identified the greatest risk of consumer harm.

Motor finance firms face an imminent formal redress scheme. CMCs face an active enforcement agenda. Lenders face a Consumer Credit Act rewrite and a credit information regime overhaul that will reshape how credit decisions are made. And all consumer credit firms face a data-driven supervisory model in which outliers will be identified quickly and challenged with pace. Yet there is opportunity here too. The CONC Chapter 3 consultation, the financial inclusion agenda, the AI sandbox, and the SMCR reform all represent genuine openings for firms willing to engage early and help write the rules that will govern this market for years to come.

The question for every Board reading this report is the same one the FCA is implicitly asking: are you ahead of these priorities, or are you about to be overtaken by them?