Regulatory resilience: What we can learn from 2020

The regulatory environment in which our collections and debt purchase members sit was pretty much up-ended by coronavirus in 2020, with almost every regulator mirroring the government’s approach and devoting substantial resources into responding to the crisis to protect the most vulnerable.

The pandemic has proven a test of not just firms’ operational resilience but that of the regulators too. This has seen the publication of urgent guidance with little time for meaningful consultation and assessment. We will have to wait until later in 2021 and beyond to truly understand any unintended consequences from that guidance. But this may be something that we have to get used to as we come to ‘expect the unexpected’ and both regulators and firms must look to learn lessons from 2020 as we move forward to ensure that future short-term crisis responses don’t have a negative long-term impact. Not only did we have to adapt very quickly to new guidance as it emerged, the pandemic also meant that a lot of regulatory work that firms had been preparing for months or even years had to be postponed.

For FCA authorised CSA member firms, the implementation deadline for some aspects of the transition to the Senior Managers & Certification Regime (SM&CR) being pushed back to March 2021 was a big missed milestone, although conversations with members indicate that many were well positioned to meet the original December 2020 deadline. Another example is the delay to the FCA’s interim report on the Credit Information Market Study until later in 2021 which there is widespread interest in following the ICO notice to Experian.

Again, this has taught us that we must prepare for future regulatory changes in a flexible way that isn’t reliant on ‘hard and fast’ timelines. Despite delays to many pieces of work, the FCA did publish its guidance on the fair treatment of vulnerable customers in 2020; a document we welcomed as it served as a clear endorsement of many of the practices already employed by CSA members and provided helpful clarification of the regulator’s expectations, especially in such challenging times. We can expect an even greater focus on this in the coming years and we are confident that our industry is already geared up to help the most vulnerable in society – including those made newly vulnerable by the pandemic – become more financially resilient.

We hope to use the opportunities arising from the pandemic such as increased awareness of the need to seek out support and open up dialogue before debts become problem debts, to demonstrate that CSA member firms are #heretohelp.

We remain concerned about the cost of regulation and are working hard to lobby for a regulatory framework that allows firms to align customer and commercial outcomes. 2020 alone saw increases in the Financial Ombudsman Service (FOS) levy and additional funding to support the advice sector in its response to the pandemic, at a time when firms have incurred significant costs of their own in responding to the crisis, not to mention the increased resource demand for many financial services firms in implementing the FCA’s emergency guidance. In our response to the FOS funding consultation, we questioned the justification in increasing costs to firms whilst acknowledging their anticipated drop in complaints; this same point has even now been raised with FOS by the Treasury Select Committee.

We continue to work with the FCA, HMT, and the advice sector in rethinking the funding of debt advice to make it more proportionate, transparent, and impactful. With increasing costs (both regulatory and operational), the ongoing challenges in responding to the pandemic, and the yet-to-be-seen economic and societal consequences of the pandemic, firms will continue to have their operational resilience significantly tested throughout 2021. If Covid-19 has taught us anything, it is that organisations must be agile and able to quickly adapt.

From a regulatory point of view, this means finding ways of upholding the highest standards without getting ‘bogged’ down in the ‘red tape’ that doesn’t actually benefit customers. Streamlining and finding synergies such as using our Code of Practice as the common denominator across all forms of collections in all sectors, will create efficiencies and ensure that best practice is the norm in the face of turbulent times to come.

With operational resilience high on the agenda for the FCA and firms, we are planning a workshop on this on 14 April.

Register for workshop

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