Consumer credit

The consumer credit industry is changing fast. Digital solutions delivered by technology-driven businesses are making credit increasingly accessible for consumers to make purchases which would otherwise not be affordable. Customers expect competitive finance packages, instant decisions and reduced administration. Businesses rely increasingly on data to make strategic decisions and cutting-edge systems to reach their markets. 

Against this backdrop are challenging conditions. On the supply side, businesses are imposing stricter lending criteria, managing higher credit risk and dealing with tougher regulation. However, the slow pace of economic growth, and continuing levels of both existing household debt and retail sales mean that the demand for consumer credit will likely hold. The UK consumer credit market is expecting annual growth of between 3% to 4%. Gross advances are expected to total £372 billion in 2023.

Regulatory focus

The FCA understands that for most borrowers, credit performs an important function, smoothing income and expenditure which, if affordable, can be beneficial. However, the FCA continues to actively supervise the sector and to monitor compliance with its rules. The FCA’s recent introduction of new rules on incentives and remuneration means that decision making in granting credit is increasingly consumer centric and less focussed on financial rewards. 

Simplifying the complex

Our consumer credit team acts for some of the largest and fastest growing consumer credit businesses in the UK and Europe – from those offering secured asset-backed lending to short term consumer credit firms offering loans through an online platform.

We will draw on our industry knowledge to inform every aspect of working with you, including an audit that focusses on understanding and harnessing your IT systems, and providing guidance on authorisation and ongoing regulatory compliance.   

Accounting can be complex.  We will provide support and guidance on accounting for credit loss provisions under IFRS 9 and IASA39. the use of special purpose vehicles under IFRS10 require careful consideration. We will spend time to understand the impact of these and other accounting standards on your business, and ensure your financial reporting reflects this.

Credit loss provisions

Funding structures