The Financial Conduct Authority’s (FCA) rules to bolster supervision of the consumer credit sector through new product sales data (PSD) reporting requirements bring a number of challenges that firms must start to prepare for.
Despite an extension to the go-live date from March next year to later dates in 2025/26, the steps to implementation are significant. Firms need to start work now to define data requirements and identify gaps, build operational readiness, and implement a robust and accurate reporting and governance framework.
The FCA rules bring about a substantive shift for the consumer credit sector, transitioning from ad hoc data submissions to a rulebook that requires granular quarterly reporting of product sales and performance data. These changes come against the backdrop of the Consumer Duty, which raises the bar for how firms deliver good customer outcomes, and the regulator’s shift towards an increasingly data-driven supervisory approach.
The level of detail expected and quantity of derived and enumerated fields in the returns, coupled with the quarterly reporting frequency, will pose a significant challenge for many firms.
The reporting challenge
The FCA’s requirements introduce over 100 new calculated fields for firms to report, distributed across sales, performance and back book data. The level of detail expected and quantity of derived and enumerated fields in the returns, coupled with the quarterly reporting frequency, will pose a significant challenge for many firms.
The extraction and consolidation of data into one system for reporting may also bring complexities given the scope of data sources required, for example on facility, customer, product, and agreement reference data. This can be more difficult where data is collected from outsourced providers, or where legacy IT infrastructure is used.
Four key areas of focus
To successfully prepare, firms must prioritise four key actions:
Perform a gap analysis of the data required in the returns against the data available internally from various source systems. Programmes may need to be set up to close any data gaps.
Understand third party data dependencies and establish regular coordination and information sharing mechanisms to satisfy all reporting fields and timelines.
Translate data into meaningful management information. This includes validating data, setting tolerances, establishing clear roles and responsibilities, and appropriate reporting channels with escalation routes and action tracking. The FCA will expect firms to incorporate relevant data into their ongoing customer outcomes monitoring which should already be in place under the Consumer Duty.
Prepare for regulatory engagement. Firms’ returns will likely drive supervisory focus, with outliers scrutinised closely. Firms should be prepared to respond and proactively remedy any identified harm.
The FCA wants to be a more data-led regulator and the new PSD returns will be a primary source of intelligence to guide its supervisory and enforcement efforts in the consumer credit sector. Ongoing cost of living pressures mean the FCA will be closely scrutinising firms’ affordability assessments and support for borrowers in financial difficulty, including the fees and charges firms apply. The regulator also expects the returns to enhance its understanding of the link between lending products’ features and the outcomes customers receive, both within the same firm and across the market.
In response to this intensified, interventionist, data-led regulatory scrutiny, firms should waste no time in galvanising preparations to meet these reporting challenges and focus on connecting what the data means for their customers and the outcomes they receive.
