FCA: weak evidence, not weak pricing, is the usual fair value failing
An FCA director's blog distils supervisory work across consumer finance firms, credit fees and charges, and home energy consumer hire agreements into three questions compliance teams should be asking about their own fair value assessments under the Consumer Duty, now three years in force.
- One credit card provider quantified cashback, foreign exchange savings and account benefits and set them directly against fees and interest paid, giving a clear evidence base for its fair value conclusion.
- Stronger firms segmented customers by credit risk, product usage, distribution channel, vulnerability characteristics, APR bands and risk-based pricing groups to test fair value across groups rather than as a single homogeneous market.
- One firm proactively contacted customers incurring certain charges to check they understood how and when those charges applied, rather than relying only on the existence or readability of disclosures.
- The FCA reviewed consumer hire agreements for home energy equipment where 'pay as you save' promotions could lead customers to believe savings or affordability were guaranteed over agreements lasting up to 25 years.
- The FCA says firms should be able to show their working: what the evidence shows, how it supports the fair value conclusion, and what they would do if it did not.