CONSUMER lenders must create a healthy culture for both employees and borrowers, a director at the City watchdog has said.
Speaking at Consumer Credit Trade Association Conference in Nottingham, Jonathan Davidson (pictured), director of supervision – retail and authorisations at the Financial Conduct Authority (FCA), praised the sector for creating a safer environment or borrowers.
However, while he acknowledged that progress has been made, he called for a greater focus on fostering a healthy culture where consumers are valued.
“We don’t plan to tell you what kind of culture you should have,” said Davidson. “These leaders emphatically do not see culture as just a compliance exercise. For them it is fundamental and there is a growing consensus that a purposeful culture in which everyone is encouraged to contribute is healthier for long-term endgames.
“In these healthy cultures, firms are not promoting themselves through misleading adverts and employees are not forced to face the moral dilemma of selling a product that they know is riskier than advertised.”
Davidson reminded FCA-regulated firms that the Senior Managers and Certification Regime (SMCR) will come into effect next December, and the main objective of that regime will be culture change.
“In the current environment, I ask you, leaders in consumer credit, to pause for a moment of self reflection on the business models and the cultures of your firms,” he said.
“We are not going to demand that you adopt any particular strategy or culture. But I think there is a lot to be said for a purposeful culture which is about the outcomes for consumers not just about compliance with rules and box-ticking.”
However, Davidson also praised consumer lenders for making “immense progress” over the past few years.
“We are seeing rapid, extraordinary and positive change,” he said.
“Since I joined the FCA three years ago, this sector has made immense progress in offering UK consumers better outcomes.
“Many of the debt traps that consumers could have easily fallen into a few years ago no longer exist. Many firms have significantly enhanced their approaches to affordability and as a result are making better-informed decisions about whether a loan is affordable. Altogether, I would assert that the sector has become a safer place for borrowers.”
“Progress has been made but there are still challenges,” added Davidson. “We must consider what the credit landscape will look like in future. And more importantly, we must consider harm that could potentially emerge.”