Emma RadmoreFCA has published a “further first supervisory notice” to Indigo Michael Limited, a high cost consumer credit lender. It first imposed a notice on the firm in July 2022, and now requires that:
- the firm must, when conducting creditworthiness assessments on new or existing customers, assume that repayment of full capital balance plus interest will be collected, without the customer having to borrow to meet repayments, when the relevant conditions to collect such a repayment are met – and that it must record the rationale if it considers in any case that this assumption is not appropriate, and must limit its use of a CPA to the maximum of the monthly sum it has assets the customer can repay; and
- the firm must not use a CPA to take repayments from any existing customer where it has reason to believe there are insufficient funds in the account, or that taking funds would leave insufficient funds for priority debts, and must not use a CPA to take payments greater than the lesser of 50% of the customer’s monthly net disposable income or the monthly amount it has considered to be affordable.
FCA has imposed the requirements as it has serious concerns about the firm’s practices. The firm has been assuming that a customer will repay the full capital balance plus interest in equal instalments over 3-4 months, up to 50% of the customer’s net disposable income. In practice, it has the right to collect larger amounts, and uses a CPA to collect repayments automatically of up to the full amount owed. FCA is concerned this may leave the customer with insufficient funds to meet priority debts or other essential living expenses.