CONC, the Consumer Credit Sourcebook within the FCA Handbook. It is a key piece of regulation, governing everything from acquisitions, marketing, conduct of business and responsible lending to debt advice, arrears, default and recovery for unsecured lending. It has been around since 2014.
An open ended nature
CONC is written to be open ended, allowing the interpretation of regulations to flex over time, and be appropriate to the current environment; take CONC 7.7.5 which states that a firm must not impose charges on a customer “unless the charges are no higher than necessary to cover the reasonable costs of the firm”. A ‘reasonable cost’ is not defined.
This evolving nature means that companies must continually review their approach, to ensure they remain ‘on-side’. A firm’s policies cannot simply be created and left, they need to evolve and reflect the latest thinking.
8 key areas
Although all areas are important, there are a number of topics that repeatedly come up in reviews.
- Policy and procedures
- Treating Customers Fairly (TCF) and forbearance
- Letters (which also come under the Consumer Credit Act 86, 87, 88)
- Vulnerability and mental capacity
- Data accuracy
- Third party
- Contacting customers
- Pre-arrears.
These are worth careful consideration. In particular the recent FCA Thematic Review focusing on ‘Early Arrears Management and Unsecured Lending’; focused on pre-arrears policies and has signalled very clearly the FCA’s desire for much greater development in this and related areas.
TCF and forbearance. TCF and forbearance is largely covered by CONC 7.3 and it outlines the need for collections departments to ensure that there is a robust policy. This is an evolving idea under which a number of key operational decisions need to be considered. This could include intensity of contact or types of forbearance solutions available to customers. They need to be factored into the collections strategy.
Vulnerability and mental capacity. The industry approach to vulnerability and in particular mental capacity has come a long way since CONC was introduced. Detailed guidance on vulnerability and mental capacity is provided under CONC 2.10 and 7.2.
CONC 7.2.1 states that “A firm must establish and implement clear, effective and appropriate policies and procedures for … the fair and appropriate treatment of customers, who the firm understands or reasonably suspects to be particularly vulnerable”. There is an awful lot to consider within this single rule. [“clear, effective and appropriate policies” as an example]
Pre-arrears. A favourite area of focus, easy to say and difficult to do. CONC 6.7.2 states the need to “monitor a customer’s repayment record and take appropriate action where there are signs of actual or possible repayment difficulties”. Included within “appropriate action” is signposting free debt advice and advising the customer of the risk of escalating the debt, however, a great deal more can be done beyond this, especially with the use of extended data.
Persistent Debt. A new area, one that has been on the FCA agenda recently following the credit card market study. These have recently been added to CONC 6.7.27-40, with specific rules and guidelines on how to approach (for more information, we have previously written about this here).
Conclusion
Studying FCA CONC isn’t glamorous but it is essential. As can be seen here there is a huge variety of evolving ideas and interpretations of CONC that need to be considered and regularly reviewing policies and procedures is key to ensuring ongoing compliance.
It is essential that firms have an evolving approach to controls and evidencing compliance and our reviews are showing that this is an increasing area of interest and activity.
If you need help, or just advice, contact us at Arum. We can help with alignment to CONC as well as broader reviews of the collections function in the context of key regulations.
Dominick Penfold – Consultant