The FCA's Vigilance: Key Compliance Risks in Consumer Lending

Consumer credit firms operate in one of the most heavily regulated corners of financial services—and for good reason. The products you offer can have a profound impact on customers' financial wellbeing, and the FCA's supervisory approach reflects that reality. 

But regulation doesn't stand still. Expectations evolve, enforcement priorities shift, and what was considered "good enough" a few years ago may now leave your firm exposed. 

So where is the FCA focusing its attention right now? And what compliance risks should consumer credit firms be prioritising in 2025? 

In this blog, we explore the key areas of regulatory scrutiny—and what you can do to stay ahead. 

1. Timely Disclosure and Regulatory Reporting 

The Risk: Meeting regulatory disclosure and reporting requirements on time is a perennial challenge—particularly for smaller firms juggling day-to-day operations alongside regulatory obligations. When crises hit (operational incidents, complaints spikes, cyber events), keeping up with reporting deadlines becomes even harder. 

Why the FCA Cares: Timely, accurate reporting isn't just about box-ticking. It allows the regulator to: 

• Identify emerging risks across the sector 

  
  

• Intervene early when firms are struggling 

  
  

• Hold firms accountable when things go wrong 

  
  

Missing deadlines, submitting incomplete data, or providing inaccurate information damages trust—and can trigger supervisory action. 

What Good Looks Like: 

• Plan ahead: Don't wait until the deadline is looming. Build reporting into your regular compliance calendar with clear ownership and accountability. 

  
  

• Automate where possible: Manual data collection is time-consuming and error-prone. Invest in systems that streamline reporting processes. 

  
  

• Have a crisis protocol: When unexpected events occur, ensure your team knows how reporting responsibilities will be managed without dropping the ball. 

2. Affordability Assessments That Stand Up to Scrutiny 

The Risk: Affordability is at the heart of responsible lending—but it's also one of the most common areas where firms fall short. Whether it's failing to gather sufficient information, relying too heavily on credit reference data, or not properly considering a customer's existing commitments, weak affordability assessments create both customer harm and regulatory risk. 

Why the FCA Cares: Lending to customers who can't afford to repay doesn't just harm those individuals—it undermines confidence in the consumer credit market as a whole. The FCA has been clear: affordability must be robust, individual, and evidenced. 

What Good Looks Like: 

• Go beyond credit scores: Credit reference data is a useful tool, but it's not the whole picture. Make sure you're considering income, expenditure, and the customer's full financial situation. 

  
  

• Document your decisions: If a customer's application is declined, or if you've accepted it despite flags in your assessment, make sure the rationale is clearly recorded. 

  
  

• Test your processes: Regularly review a sample of lending decisions to ensure your assessments are being applied consistently and appropriately. 

  
  

• Monitor default rates: Review arrears data and look for trends in those who need forbearance, struggle to pay or default. Are vulnerabilities being picked up early? Does the affordability assessment need to change? 

3. Treating Customers in Arrears and Financial Difficulty Fairly 

The Risk: How you respond when customers fall behind on payments is a critical test of fair treatment. Overly aggressive collections practices, inflexible forbearance options, or poor communication can quickly escalate complaints—and attract regulatory attention. 

Why the FCA Cares: The regulator expects firms to recognise that customers in financial difficulty need support, not pressure. Forbearance should be meaningful, realistic, and tailored to individual circumstances. 

What Good Looks Like: 

• Train your collections teams: Make sure staff understand vulnerability indicators and know how to have empathetic, constructive conversations. 

  
  

• Offer flexible forbearance: Payment holidays, reduced payments, and term extensions should all be on the table—tailored to what will genuinely help the customer. 

  
  

• Monitor outcomes: Track whether forbearance arrangements are successful, or whether customers are simply cycling through short-term fixes without resolving their situation. 

4. Handling Complaints Effectively 

The Risk: Complaints are an inevitable part of consumer credit—but how you handle them matters enormously. Delayed responses, dismissive attitudes, or failure to identify and fix root causes can turn a manageable issue into a regulatory problem. 

Why the FCA Cares: Complaints data is one of the FCA's key tools for identifying poorly run firms. High complaint volumes, long resolution times, or patterns of upheld complaints at the Financial Ombudsman Service all raise red flags. 

What Good Looks Like: 

• Respond promptly: Meet (or beat) the regulatory timelines for acknowledging and resolving complaints. 

  
  

• Learn from complaints: Don't just resolve individual cases—look for themes that point to systemic issues in your processes or products. 

  
  

• Empower your complaints team: Make sure they have the authority and support to resolve issues fairly and quickly, without unnecessary escalation. 

5. Financial Promotions and Advertising 

The Risk: Getting your marketing wrong doesn't just risk misleading customers—it can land you in serious regulatory trouble. From unclear APR information to misleading prominence of promotional rates, the FCA is particularly vigilant about how consumer credit products are advertised. 

Why the FCA Cares: Financial promotions shape customer expectations and influence borrowing decisions. If your ads are unclear, incomplete, or designed to obscure key information, you're setting customers up to make poor choices—and that's a Consumer Duty fail. 

What Good Looks Like: 

• Clarity over cleverness: Make sure your promotions are clear, fair, and not misleading. If in doubt, simplify. 

  
  

• Prominence matters: Key information (like APR, fees, and eligibility criteria) shouldn't be buried in small print or presented less prominently than promotional messages. 

  
  

• Review regularly: Marketing materials should be reviewed and approved before launch—and checked periodically to ensure they remain compliant. 

6. Vulnerability and the Consumer Duty 

The Risk: The Consumer Duty has raised the bar for how firms identify and support vulnerable customers. If your firm doesn't have robust processes for recognising vulnerability, adapting communications, and ensuring fair outcomes, you're not just failing individual customers—you're falling short of a fundamental regulatory expectation. 

Why the FCA Cares: Vulnerable customers are at greater risk of harm, and the regulator expects firms to take proactive steps to protect them. This isn't about one-size-fits-all policies—it's about flexibility, empathy, and good outcomes. 

What Good Looks Like: 

• Train all customer-facing staff: Vulnerability can present in many forms (financial, health-related, life events). Make sure your teams can spot the signs and respond appropriately. 

  
  

• Build flexibility into your processes: Rigid policies and procedures can create barriers for vulnerable customers. Ensure your systems allow for individual treatment. 

  
  

• Monitor outcomes for vulnerable customers: Are vulnerable customers disproportionately represented in complaints, arrears, or declined forbearance requests? If so, you need to act. 

How Adempi Can Help 

Staying on top of these risks requires more than just reading FCA guidance—it means embedding best practice into your day-to-day operations and being able to evidence your approach when the regulator asks. 

At Adempi, we support consumer credit firms to: 

• Review and strengthen compliance frameworks across affordability, collections, complaints, and financial promotions 

  
  

• Conduct gap analyses to identify where your firm may be exposed 

  
  

• Deliver training to your teams on key regulatory expectations 

  
  

• Prepare for supervisory engagement, including skilled persons reviews and regulatory visits 

  
  

Our consultants combine deep technical expertise with a practical, commercial perspective—because we know you're balancing regulatory expectations with running a sustainable business. 

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Get in touch if you'd like to explore how we can help. You can reach us at contact@adempi.co.uk or on 0203 925 4761 

Or to prepare your business for whats next or find out more about our services from the website: Adempi - FCA Compliance Consultants.