How the FCA’s Supervision Intensity in Consumer Credit Is Evolving
Over the past year, the FCA has made one point unmistakably clear: supervision in the consumer credit sector is becoming more assertive, more data-driven, and far more targeted. For lenders and brokers, this marks a shift away from reactive oversight and toward a model where the regulator actively identifies risks before they crystallise into harm. As the economic environment tightens, consumer vulnerabilities increase, and digital credit journeys expand, the FCA’s supervisory posture is evolving in ways firms cannot afford to ignore.
This blog explores where that intensity is coming from, what it means in practice, and how consumer credit businesses can prepare for the next phase of regulatory scrutiny.
A regulator under pressure — and using data more aggressively
The FCA’s focus for 2025–26 is shaped by three converging pressures.
First, the Consumer Duty has raised the bar for expectations around outcomes monitoring, fair value and customer understanding. The regulator now expects firms to not only comply with rules, but to proactively demonstrate that customers are receiving fair outcomes.
Second, economic conditions have amplified affordability challenges for households. With more consumers entering arrears or exhibiting signs of financial stress, the FCA is using supervisory tools to intervene faster in high-risk areas.
Third, digitalisation continues to reshape how credit is accessed. Automated journeys, algorithmic decisioning and digital distribution introduce new risks — ones that the FCA wants earlier visibility over.
As a result, the regulator is turning to data analytics, dashboards, and real-time oversight more than ever before. Firms can no longer assume that supervisory attention will only arise after complaints, press interest or thematic trends develop. Increasingly, the FCA is identifying harm through trend analysis, MI anomalies, CCR data, and rapid assessments of firm conduct.
More targeted, sector-specific supervision
The FCA has been open about which parts of the consumer credit market it is watching most closely. While all firms face heightened expectations, some areas are receiving sharper scrutiny — and consumer credit is firmly in that group.
Recent speeches, focus area publications and supervisory statements highlight particular concerns for:
- High-cost and subprime lending, where affordability and arrears management remain recurring problems
- Guarantor, home-collected, and catalogue credit, which continue to attract higher-than-average complaints
- Credit brokers, especially those reliant on digital marketing, introducers and automated matching tools
- Subscription-based and ancillary credit services, where fair value and clarity of purpose are often weak
- Digital-only lenders, particularly those using proprietary decisioning models or rapid-pay-out processes
The FCA is moving away from broad thematic work and toward selective, intensive scrutiny of firms in these higher-risk categories. In practical terms, that means more data requests, more supervisory meetings, higher expectations around MI quality and, where necessary, directed remediation.
The new expectation: evidence, not assertion
One of the more fundamental shifts is the FCA’s insistence that firms must be able to prove that customer outcomes are positive. This goes far beyond policy documentation. The regulator is asking firms to demonstrate through data, testing and monitoring that:
- Products deliver fair value across different customer groups
- Consumers understand key features and risks
- Digital journeys do not mislead or confuse
- Automated decisioning is accurate, explainable and unbiased
- Customer support systems are accessible and effective
- Vulnerable customers are identified early and managed carefully
In other words, it is no longer enough to comply — firms must be able to show their working.
For many consumer credit businesses, particularly smaller brokers or firms with lean compliance teams, this is a more demanding standard than before. But it is also where the regulator is increasingly positioning its expectations.
Management Information as a frontline defence
Supervision activity is now heavily influenced by the quality and clarity of a firm’s MI. Poor reporting — whether through CCR009 returns, customer outcomes testing or fair value assessments — is often the first indicator that the FCA uses to determine whether a firm understands its own risks.
Firms need MI that is:
- Accurate and consistent
- Broken down by customer types and channels
- Reflective of real customer journeys, not hypothetical ones
- Updated regularly, ideally in near real time
- Read and challenged by Boards and senior leadership
- Used to identify emerging patterns before harm occurs
Weak MI is increasingly seen as evidence of weak governance. And the FCA has been clear that where MI is missing, inconsistent or poorly understood, intensive supervision will follow.
What the next wave of FCA supervision will look like
Based on the FCA’s stated priorities for 2025–26, firms should expect:
- Faster, more intrusive interventions
The regulator is using data analysis to identify anomalies earlier and intervene long before harm escalates. This means quicker regulatory contact and more requests for evidence.
- Closer scrutiny of consumer outcomes testing
Firms must assess and record outcomes across the lifecycle — origination, servicing, arrears, collections — and show how these outcomes differ across demographic and vulnerability categories.
- Greater interrogation of decisioning models
For digital lenders and brokers using matching algorithms, expect questions on bias, explainability, input data quality and error rates.
- More focus on distribution chains
Where lead generators, affiliates or introducers are involved, the FCA will ask how firms oversee them — and how they ensure communications remain compliant.
- Tougher expectations around fair value
Manufacturers and distributors must both be able to justify the overall value customers receive, including any ancillary fees introduced in the chain.
What firms should be doing now
The businesses that cope best with rising supervision intensity are those that invest early in governance, monitoring and reporting. Firms should, at a minimum, be looking at:
Strengthening MI frameworks
Boards need MI that is timely, comprehensive and genuinely reflective of customer experience. Firms should consider dashboards that break down outcomes by product, channel and customer type.
Challenging Product Governance processes
Product reviews must go beyond policy compliance and address:
- Performance against intended outcomes
- Vulnerability indicators
- Complaints patterns
- Affordability risks
Fair value assessments should be objective, data-led and refreshed regularly.
Testing digital journeys end-to-end
Whether using proprietary lending platforms, broker-introduced digital journeys, or outsourced systems, firms must ensure disclosures, eligibility, and support are clear and consistent.
Reviewing distribution oversight
Firms should conduct deeper reviews of introducer activity, financial promotions, call scripts and customer disclosures across all channels.
Ensuring the Board is engaged and accountable
Evidence of challenge, oversight and decision-making must be recorded — the FCA is increasingly reviewing governance minutes and MI interpretation.
How ALPH can help firms prepare for the next phase
At ALPH Legal & Compliance, we help consumer credit firms stay ahead of regulatory expectations by delivering:
- Independent reviews of MI, governance and outcomes testing
- Product governance and fair value assessments
- Digital lending and algorithm oversight reviews
- Distribution chain audits, including introducers and affiliates
- Vulnerability framework assessments
- Training for Boards and senior leaders on new supervisory expectations
The firms that invest now in robust governance, data quality and outcome monitoring will be best placed to manage the FCA’s evolving approach. Those who wait for regulatory intervention may find the scrutiny considerably more challenging.
The next wave of supervision is already underway. The key question for firms is whether they are prepared to meet it, or simply hoping not to be noticed. With the FCA’s increasing use of data and faster intervention tools, that is becoming a much riskier strategy for the sector.