This is the Conusltantion response submitted to the FCA by Jonathan Davis in his capacity as Chair of the APCC
(Association of Professional Compliance Consultants) Consumer Credit Working
Group. While informed by discussions with the Working Group and members of the
APCC management team, the views expressed are his own and should not be taken as
representing the formal position of APCC or all members of the Working Group.
Introduction
The Consumer Credit Working Group welcomes the FCA's review of CONC 3 and
supports the broader objective of simplifying the Handbook and removing requirements
that are duplicative of the Consumer Duty. We agree that firms should have greater
flexibility to communicate with consumers in ways that reflect modern channels,
technological developments and evolving customer journeys, while maintaining
appropriate consumer protections.
Our comments focus primarily on the Discussion Paper questions relating to cost
disclosure and Representative APR. We recognise the FCA's challenge in balancing two
legitimate objectives:
• Supporting consumer understanding of the cost of credit.
• Preserving comparability and competition between providers.
In our view, the current regime does not always achieve either objective effectively,
particularly in relation to short-term and risk-based lending products.
Question 9 – Are the three APR disclosure triggers appropriate?
We do not believe the current triggers remain fully appropriate.
This is consistent with the FCA's own research findings published alongside CP26/15,
which indicate that consumers frequently use APR as a relative indicator of cost while
having a limited understanding of how the measure is calculated.
The three triggers were developed more than twenty years ago in a significantly different
advertising environment. They were designed for a world dominated by print advertising
and standardised marketing messages rather than personalised digital journeys.
The "access to credit", "comparison" and "incentive" triggers now operate inconsistently
and can create unintended outcomes. In particular:
• Many modern advertisements are inherently promotional and therefore trigger
APR disclosure almost by default.
• Firms often struggle to determine whether a particular message constitutes an
incentive or comparison.
• The triggers can result in lengthy and complex disclosures that reduce rather
than enhance consumer understanding.
We therefore support either:
a) substantial simplification of the triggers; or
b) removal of the triggers entirely, with firms instead required under the Consumer
Duty to determine when cost information is necessary to support consumer
understanding.
We consider the latter option increasingly attractive given the maturity of the Consumer
Duty framework.
Question 10 – If the triggers are removed, would the Duty-led approach suffice?
Subject to appropriate supervisory oversight, we believe it would.
The Consumer Duty requires firms to communicate information that customers need,
at the right time, and in a way they are likely to understand. This outcomes-based
approach is better aligned with modern customer journeys than rigid trigger-based
rules.
However, complete removal of prescriptive requirements should not mean the removal
of cost disclosure altogether. The FCA should establish clear expectations that
consumers receive meaningful cost information before engaging substantively with a
credit product.
The focus should shift from whether a disclosure has been triggered to whether the
disclosure helps consumers understand the cost and suitability of the product.
Whether APR should be replaced or supplemented
We do not support complete replacement of APR.
Despite its weaknesses, APR remains the only widely recognised, standardised metric
that allows consumers to compare products across firms.
However, we strongly agree with the FCA's observation that APR is often poorly
understood and can be particularly misleading for:
• short-term lending products;
• small-sum credit products; and
• products with substantial fees or ancillary benefits.
Consumer research consistently demonstrates that many consumers do not
understand what APR represents, how it is calculated or how it differs from the interest
rate.
Our recommendation is therefore to retain APR as a comparison metric while
supplementing it with additional disclosures that are easier for consumers to
understand.
We recommend the FCA consider requiring firms to disclose:
• Total cost of credit (£);
• Total amount repayable (£);
• Representative repayment amounts; and
• Product-specific cost metrics where appropriate.
For short-term lending products in particular, "cost per £100 borrowed" may provide
consumers with a more meaningful indication of cost than a highly annualised APR
figure.
A hybrid disclosure framework is likely to deliver the best balance between consumer
understanding and comparability.
Whether firms should have greater flexibility in presenting cost information
We support increased flexibility.
The current rules were largely designed for traditional advertising formats. They are not
always well suited to digital channels, mobile devices, social media or interactive
customer journeys.
The Consumer Duty already requires firms to test and monitor consumer
understanding. This creates an opportunity for firms to innovate and present
information in ways that are more engaging and understandable.
We would support a framework that:
• Prescribes minimum outcomes rather than prescribed wording;
• Allows use of interactive tools and calculators;
• Permits different disclosure formats across different channels; and
• Encourages consumer testing and evidence-based communications.
However, flexibility should not undermine comparability. The FCA could retain a small
number of core disclosure principles to ensure consumers can still compare products
across providers.
Whether the representative example remains useful
We believe representative examples remain valuable.
Consumer research consistently demonstrates that consumers understand practical
examples more easily than abstract percentages.
A representative example allows consumers to answer the question that matters most:
“What would this cost me?”
Accordingly, we do not support removing representative examples entirely.
However, we do support reviewing the current structure.
The FCA should consider allowing firms greater flexibility in how examples are
presented and encouraging examples that reflect realistic borrowing scenarios rather
than purely formulaic calculations.
Representative examples should focus on supporting understanding rather than
compliance with technical disclosure requirements.
Whether the current 51% Representative APR threshold remains appropriate
We believe the FCA should review the 51% threshold.
The current rule permits a Representative APR to be advertised even though almost half
of consumers may receive a higher rate.
This can create a disconnect between the advertised rate and the rate actually received
by a significant proportion of customers.
While we recognise the practical challenges associated with risk-based pricing, the
current threshold does not always align with consumer expectations of the word
"representative."
Our preferred option would be to retain a representative rate but require firms to
disclose the proportion of successful applicants expected to receive that rate or a lower
rate. We believe this would improve transparency without sacrificing comparability.
For example:
"Representative APR 19.9%. Approximately 60% of successful applicants receive this
rate or lower."
This would improve consumer understanding while preserving comparability.
Conclusion
We support the FCA's broader objective of simplifying CONC 3 and placing greater
reliance on the Consumer Duty.
Any future disclosure framework should be assessed against demonstrated consumer
understanding outcomes rather than compliance with prescribed disclosure formats.
In relation to cost disclosure, we believe the future framework should be guided by three
principles:
• Consumer understanding should take precedence over technical compliance.
• Comparability across providers should be preserved.
• Firms should have flexibility to communicate information in ways that reflect
modern channels and customer journeys.
Accordingly, we ask that the FCA consider:
• Simplifying or removing the existing APR triggers.
• Retaining APR as a standard comparison metric.
• Supplementing APR with more intuitive cost measures.
• Increasing flexibility in presentation of cost information.
• Retaining representative examples while modernising their use.
• Reviewing and strengthening the 51% Representative APR threshold.
We would welcome continued engagement with the FCA as it develops future proposals
in this area.
ENDS
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