- With regulation of consumer credit firms having shifted from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA), our client had to apply to the FCA for full authorisation.
- This change led our client, a motor finance provider, to appoint Huntswood to assess its strategy and operations to provide assurance and identify areas of non-compliance, conduct risk and potential customer detriment.
- Our client engaged us to complete a regulatory assurance review and to support them with their application for full FCA authorisation. Our client’s business model was based predominantly on an intermediated approach, offering loans through third party brokers.
- We were engaged to carry out an independent assessment of their ‘current state’ position across several key areas including business model and strategy; governance; control framework; culture; sales process; training and competence; and complaints handling.
- We deployed two ex-regulators from our Advisory Services team to review our client’s documented policies and procedures, and business model, and interview key members of the senior management team to assess whether customers were at the heart of the business. This was a key element that the FCA would examine.
- Each area was assessed against the FCA’s High Level Principles of Business, the Consumer Credit Sourcebook (CONC), Treating Customers Fairly (TCF) outcomes, regulatory guidance and standards, and industry best practice.
- We reviewed our client’s risk management process, assessing how it identified, managed and mitigated risk. We reviewed their governance structure, and assessed key person risk and then provided advice on how to achieve a common culture.
- They outsourced some of their IT capabilities to a third party. We interviewed members of senior management to assess the level and nature of due diligence carried out on the third party.
- Other areas reviewed included the proposed funding model, financial crime, whistleblowing, data security and regulatory reporting.
- We interviewed senior management to understand the strategies in each area and then reviewed a number of documents to assess whether these reflected senior management’s views, aligned to regulatory expectations and focused on TCF. We looked for consistency between the messages received and delivered to assess our client’s culture.
- We produced a prioritised risk report that identified our findings, highlighted the resulting risks of potentially unfair customer outcomes and recommended actions. We were also involved in gap filling and helping our client with compliance monitoring.
- Our report was well received by the senior management team and immediate changes have been made. The Managing Director was very appreciative of how the review was undertaken and the quality and depth of our report. The report allowed our client to create a project plan for their journey to FCA authorisation.
- We have also been asked to facilitate a risk awareness workshop for the Executive team. A member of our team will assist our client in its preparation for full FCA authorisation, support the design and development of a new governance framework and draft a regulatory business plan.