This review looked at how consumer credit firms pay and incentivise their staff and manage the risks arising from these reward arrangements.
August 2025 update: This review is historical. See what we publish[1] for more information and current views. Whilst this Thematic Review is historical, please note the findings from the work to mitigate the issues we identified were published in final rules and guidance[2].
Summary
This thematic review focused on staff remuneration and incentives, covering a broad range of consumer credit sectors and firms where consumer credit is secondary to their main business.
The purpose of our review was to understand the nature of staff incentives, remuneration and performance management arrangements in the consumer credit market. We focussed on the risks that can arise and how firms control and mitigate those risks. We sought to examine good and poor practices.
The findings from our thematic work were published in CP17/20[2], alongside our proposals for measures to mitigate the issues we identified.
Background
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.
Additionally, work carried out by the FSA/FCA between 2012 and 2014 found a number of firms (including banks and insurers) had schemes that were likely to drive mis-selling. High level findings from this previous work were:
- few firms had fully considered risks in their incentive schemes (and therefore had not considered mitigating those risks)
- schemes were so complex management and other staff did not understand them
- where risks had been recognised, the controls firms had implemented to manage risks in incentive schemes were often lacking and / or ineffective
- a number of managers received a bonus based on the sales made by the staff they supervised, creating a possible conflict of interest
We sought to understand if similar or new issues are also present across the consumer credit sector.
Who will be interested in this review?
This review will be of interest to all consumer credit firms we regulate and relevant trade bodies. Consumers and consumer groups may also be interested in this piece of work.
Our approach
Our approach to this work was as follows:
- stage one: desk based review of firms’ incentives policies, remuneration arrangements and controls
- stage two: on-site visits and more detailed testing on a selection of firms
feedback results to firms and action taken if required
Firms included in the review cover a broad range of consumer credit sub-sectors and cover a mix of business sizes, including both firms who sell to – and collect from – consumers.
Timeline
We undertook our stage 1 review work and stage 2 visits in 2015 and early 2016, with the findings at each stage shaping our approach going forward.
- Stage one information request: Summer 2015
- Stage one analysis: Autumn/Winter 2015
- Stage two visits and analysis: Winter 2015/Spring 2016
- Analysis and conclusions: Summer/Autumn 2016
- Consideration of mitigation options: Autumn/Winter 2016
- Reporting on review findings and mitigation proposals: July 2017
- Consultation on mitigation proposals: July - October 2017
More information
The previous FSA/FCA pieces of work are as follows:
2012 FSA GC 12/11: Risks to customers from financial incentives consultation[3]
2013 FSA FG 13/1: Risks to customers from financial incentives final guidance[4]
2014 FCA TR 14/4: Risks to customers from financial incentives – an update[5]
Performance management guidance[6] has been published and will also have some cross-over with the review.