The FCA first introduced the Consumer Credit Sourcebook (CONC), the sourcebook for credit-related activities, in April 2014. Its purpose is to enable debt advice firms to properly and efficiently help their customers in both lending applications and repayments.
Assimilated through useful parts of older regulations, and new advice, today Global Relay explores CONC in all its facets.
What is CONC?
CONC stands for the Consumer Credit Sourcebook, and works as a handbook for lending and debt advice firms. Their advisors must work with CONC to prove that the firms are sufficiently authorized to operate, and effectively assist clients.
CONC applies generally to ‘all credit-related activities’, which covers a huge range. For example, supervising firms must consider their reporting obligations, and there are detailed requirements for any credit firm handling complaints.
CONC therefore acts as an operational manual and set of best practices for any credit-related firm to follow.
The Key Principles For Business (PRIN)
Principles (under the PRIN section of CONC) apply as a whole to firms, and it’s the organizations that must ensure that their advisors are adhering.
Although there are quite a few principles, the FCA highlights the following as most essential;
- Principle 1: firms must conduct business with integrity
- Principle 2: firms must conduct business with due skill, care and diligence
- Principle 3: firms must take reasonable care to organize and control affairs with adequate risk management systems
- Principle 6: firms must pay due regard to the interests of customers, and treat them fairly
- Principle 7: firms must pay due regard to information needs of clients, and communicate information in a clear, fair and not misleading way
- Principle 9: firms must take reasonable care to ensure the suitability of advice and discretionary decisions for any customer who is entitled to rely on its judgement
- Principle 10: firms must arrange adequate protection for clients’ assets when it’s responsible for them
- Principle 11: firms must deal with regulators in an open and cooperative way, disclosing anything relating to the firm that regulators would expect, and to the appropriate regulator
Application
Understanding the most important principles of CONC, it’s clear that firms are expected to act within the interests of customers.
There are three main provisions under the application of CONC:
- Firms must explain the key features of a regulated credit agreement so that a customer can make an informed decision
- Firms must monitor customer’s repayment records and take appropriate action when there are signs of repayment difficulty (whether suspected or confirmed)
- Firms must take reasonable steps to ensure that any credit broker that it enters into a third party with are authorised and appointed representatives
Here’s an example of how these provisions are applied:
Per the second application, CONC includes a guide for identifying when a customer is in financial difficulties. Signs include: consecutively failing to meet minimum repayments, outstanding county court judgments (CCJs) for non-payments, and adverse credit entries on the file.
Acting within the customer’s interest, for example, might mean ensuring that there are barriers in place to prevent further successful loan applications immediately after a default. Or, it could mean agreeing on a debt management plan to prevent total delinquency.
It’s clear that the application of CONC overlaps with many of the principles within Consumer Duty. For example, both regulations refuse the idea of high-pressure selling tactics which could convince customers to accept products that are not suitable for their situations.
Compliance is key
CONC applies to firms with customers who either live or work in the UK. And as mentioned, it’s up to firms themselves to ensure that their employees and advisors are working under the CONC guidelines.
At most firms, this means that strong internal controls play a large part in CONC compliance. Combined with machine-learning, advisors can confidently assess lending applications in order to prevent the risk of delinquent customers. Alternatively, automated ‘missed payment’ notifications can enable advisors to reach out to the customer and create an alternative repayment plan before it’s too late.
Both of these solutions can prevent adverse credit entries on file, and generate a positive customer experience. But to really stay ahead of evolving compliance needs, Global Relay can help. Put compliance at the heart of your business, capture data, build compliant messaging and help your firm to securely work with third parties.