The Financial Conduct Authority (FCA) has launched a thematic review looking at staff remuneration and incentives within the consumer credit industry.
According to the FCA, the purpose of the review is to understand the nature of staff incentives, remuneration and performance management arrangements in the consumer credit market.
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It said it would focus on the risks that could arise and how firms control and mitigate those risks, as well as examine good and poor practices.
The FCA said: "Supervisory work that we have carried out on other issues suggested many consumer credit firms may be operating high-risk incentive schemes, which can often lead to poor consumer outcomes if not managed effectively."
The regulator said work it carried out between 2012 and 2014 found a number of firms (including banks and insurers) had schemes that were likely to drive mis-selling. Findings included that few firms had fully considered the risks of their incentive schemes, that some schemes were too complex for management and staff to understand and that where risks had been recognised, controls were either lacking or ineffective.
The FCA said it intends to find out if similar or new issues are also present across the consumer credit sector.
This was a topic the FCA said it would be reviewing in its 2015 Business Plan, released in March.
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By GlobalDataThe review will take place in two stages. The first step, due to last to Q4 2015, will feature a desk based review of firms’ incentives policies, remuneration arrangements and controls. The second step, which will last from Q4 2015 to Q2 2016, will feature on-site visits and more detailed testing on a selection of firms.
