The Financial Conduct Authority (FCA) is planning to take action concerning staff sales incentives at consumer credit providers.
The regulator has expressed concern that sales incentives for staff at consumer credit companies could have an adverse effect on what consumers are given credit, leading to many obtaining credit that they cannot afford.
As part of the consultation carried out by the Financial Conduct Authority, the regulator reviewed incentives and performance management policies and practices for sales and collection staff at 98 consumer credit firms.
It found that 40 per cent of the sample had procedures that posed a high, or very high, risk of customer detriment.
As a result of the consultation, the FCA has proposed introducing rules for consumer credit firms to ensure that any bonus schemes don?t cause undue harm to consumers accessing credit or loans.
Jonathan Davidson, executive director of supervision, retail and authorisations, said: ‘The way firms pay and manage the performance of their staff is a key driver of culture and customer outcomes, and a continuing priority for the FCA. We expect firms to understand the effects their staff incentives might be having.’
The Bank of England has already expressed concerns about the ongoing boom in consumer credit, and recently instructed the main high street banks to increase the capital holdings that they must set aside against losses, in case of a consumer credit crisis.
The new regulations on staff incentives will also apply to the rapidly increasing peer-to-peer lending market.
Michael Todt, content manager at peer-to-peer firm Lending Works, commented: ‘We note with interest the FCA?s proposals on staff remuneration and incentives in consumer credit firms, which is an issue of growing significance.
Our team members are compensated based not only on measures of financial performance, but also our unique values-focused criteria, which we expect each employee to embody.
‘A more equitable share of the benefits between all parties within financial services is thus something we will always champion.’