CONC: A Complete Guide for FCA-Regulated Lenders

CONC — the FCA’s Consumer Credit Sourcebook — sets out the conduct obligations that apply to every FCA-authorised firm involved in consumer credit: from creditworthiness assessments and pre-contract disclosures to debt collection, arrears management and the treatment of vulnerable customers.

Consumer credit is one of the FCA’s largest supervised sectors by firm number, and CONC is its principal conduct rulebook for the market. Understanding what CONC requires — and where it interacts with the FCA’s newer Consumer Duty obligations — is essential for any compliance professional, finance director or senior manager working in or for a consumer credit firm.

What Is CONC and Who Does It Apply To?

CONC is the chapter of the FCA Handbook that implements the consumer credit conduct requirements introduced when the FCA took over regulation of consumer credit from the Office of Fair Trading in April 2014. Its scope tracks the Consumer Credit Act 1974 broadly — it applies to firms carrying on regulated consumer credit activities, including credit broking, debt adjusting, debt counselling, debt collecting, debt administration and operating an electronic system in relation to lending.

The firms within CONC’s scope are diverse: high-street lenders, digital credit providers, buy-now-pay-later operators, motor finance businesses, credit brokers, debt management firms, and the internal consumer credit functions of retail banks and building societies. Every firm holding a consumer credit permission — whether as a principal activity or alongside other regulated activities — must comply with the applicable sections of CONC.

CONC sits within the broader FCA regulatory framework. The FCA’s Principles for Businesses apply to all authorised firms including consumer credit firms. The FCA’s Conduct of Business Sourcebook (COBS) applies where relevant. The Consumer Duty applies to consumer credit firms in relation to retail customers. CONC is the sector-specific layer on top of these general obligations.

Creditworthiness Assessments Under CONC

CONC 5 requires lenders to carry out a creditworthiness assessment before entering into a regulated credit agreement with a borrower. The assessment must consider two distinct matters: whether the borrower will be able to meet the repayments in a sustainable way (affordability), and the potential impact of the credit on the borrower’s financial situation (credit risk). Treating these as a single test is a common compliance weakness — CONC requires both to be considered separately.

The affordability element of the creditworthiness assessment must be based on sufficient information about the borrower’s financial circumstances — typically a combination of income information, committed expenditure and existing debt obligations. The FCA does not prescribe a specific methodology, but expects firms to have a documented, consistent process that is proportionate to the amount and type of credit being assessed and the borrower’s apparent risk profile.

Vulnerability is an increasingly significant consideration within creditworthiness assessments. Where information available to the lender suggests the borrower may be in financial difficulty, may not fully understand the terms of the credit being offered, or has characteristics that make them more susceptible to harm, CONC requires the firm to apply greater scrutiny. The Consumer Duty’s cross-cutting rule on acting in good faith reinforces this obligation for firms in scope of the Duty.

Pre-Contract Information and Explanations

CONC 4 implements the Consumer Credit Directive requirements for pre-contract information. Before entering a regulated consumer credit agreement, a firm must provide the borrower with the Standard European Consumer Credit Information (SECCI) form, or equivalent pre-contract information in the required format. For mortgage lending the equivalent is the European Standardised Information Sheet (ESIS).

Beyond the information requirement, CONC 4 imposes an obligation to provide adequate explanations. The borrower must receive an explanation of the key features of the credit — the interest rate and total cost of credit, the repayment terms, the consequences of missing payments, and any optional features — in a way that enables them to assess whether the agreement is suited to their needs and financial situation.

The adequacy of explanations is assessed by reference to the intended recipient. An explanation that would be adequate for a financially sophisticated borrower may not be adequate for a borrower with limited financial experience or literacy. CONC requires the explanation to be tailored, not templated. Under the Consumer Duty’s communications outcome, consumer credit firms must go further: communications must not merely disclose information but actively support good consumer decision-making.

Financial Promotions Under CONC

CONC 3 contains specific conduct requirements for financial promotions in consumer credit markets. These apply alongside the general financial promotions rules in COBS 4 and the FCA’s fair, clear and not misleading standard. Consumer credit promotions must include the representative APR where relevant, present interest rates clearly, and include required warnings where the credit is secured or involves a variable rate.

The FCA has consistently identified consumer credit promotions — particularly in the high-cost short-term credit, motor finance and buy-now-pay-later markets — as an area of supervisory concern. Firms that present credit as a simple, accessible product without adequate prominence for costs, risks and repayment obligations attract scrutiny. The Consumer Duty has raised the bar: communications must not create unrealistic expectations or use techniques that exploit cognitive biases.

Arrears, Default and Recovery

CONC 6 and CONC 7 set out the obligations that apply when a borrower falls into arrears or default. These are some of the most prescriptive and operationally significant provisions in the sourcebook, covering: the timing and content of arrears notices; the obligation to refer borrowers to free debt advice; forbearance obligations; the treatment of customers in financial difficulty; and the conduct expected of firms in recovery and enforcement action.

The obligation to treat customers in arrears with forbearance is not merely a procedural requirement — it requires firms to consider the individual borrower’s circumstances and to apply a response proportionate to those circumstances. A firm that applies a standard collections process without adapting it for borrowers who are clearly in financial difficulty, or that fails to consider whether a repayment arrangement is affordable before pursuing enforcement, is likely to be in breach of both CONC and the Consumer Duty.

CONC 7.3 requires firms to signpost borrowers in arrears to free debt advice — specifically approved bodies including StepChange, the Money Advice Service, Citizens Advice and National Debtline. The FCA expects this to be a genuine referral, not a formulaic notification. Where a borrower is clearly in financial difficulty, actively facilitating engagement with debt advice — rather than merely disclosing its existence — is the expected standard.

Debt Collection Under CONC

CONC 7 contains detailed rules on the conduct of debt collection activities — whether carried out by the original lender or a separate debt purchaser or collector. The rules prohibit specific practices including: contacting borrowers at unreasonable hours; using language or conduct that is oppressive, coercive or threatening; misrepresenting the legal position; and applying undue pressure to repay.

Contact frequency is a particularly significant area. CONC does not prescribe a maximum number of contact attempts, but the FCA expects firms to have a documented approach to contact frequency that is reasonable having regard to the borrower’s circumstances. Firms that make repeated contact attempts in short succession — particularly where the borrower has indicated they cannot engage at that time or has asked for communication through a specific channel — face supervisory risk.

Third-party debt purchasers and collectors are subject to CONC in the same way as original lenders. A firm that purchases a debt book acquires not just the debt but the conduct obligations that attach to its collection. Due diligence on the conduct standards of debt books being acquired has become an important element of debt purchase transactions in the post-Consumer Duty environment.

Vulnerable Customers Under CONC and Consumer Duty

CONC requires consumer credit firms to treat vulnerable customers with appropriate care at every stage of the credit lifecycle — from creditworthiness assessment and pre-contract disclosures through to arrears management and collections. The FCA’s Financial Lives Survey data has consistently shown that a significant proportion of consumer credit borrowers have one or more characteristics of vulnerability: low financial resilience, mental health conditions, life events such as bereavement or relationship breakdown, or limited English language capability.

The Consumer Duty significantly elevated the vulnerability standard for firms in scope. Under the Duty’s consumer understanding outcome, firms must take active steps to identify vulnerability and to adapt their communications and processes accordingly — not merely avoid making things worse for vulnerable customers. The FCA’s expectation is that vulnerability is embedded in product design, communications, operational processes and governance frameworks, not treated as an edge case handled by a separate vulnerable customer team.

CONC and the Consumer Duty: How the Two Regimes Interact

Consumer credit firms that are within scope of the Consumer Duty face obligations from both CONC and the Duty. Where the two overlap — for example, on the treatment of customers in financial difficulty, the adequacy of pre-contract explanations, or the conduct of collections — the Consumer Duty typically sets the higher standard. Compliance with CONC is necessary but not sufficient for a firm seeking to demonstrate compliance with the Duty.

The FCA has confirmed that the Consumer Duty does not replace CONC — both continue to apply, and firms must comply with both. Where CONC rules are more prescriptive than the Duty’s outcome-based requirements, CONC rules govern. Where the Duty requires a higher standard than CONC’s minimum rules, the Duty standard applies. Consumer credit compliance functions need to map their CONC obligations against the Duty’s outcomes and identify the areas where the Duty requires material uplift.

The Compliance Function’s Role Under CONC

Consumer credit compliance is one of the most operationally intensive areas of FCA regulation. The compliance function in a consumer credit firm must oversee financial promotions across all channels, creditworthiness assessment methodology and documentation, pre-contract disclosure processes, collections and arrears management conduct, vulnerable customer identification and treatment, complaint handling, and the management information provided to the board on all these matters.

Under the SMCR, the relevant senior manager — typically the SMF16 Compliance Oversight Function holder — carries personal accountability for the adequacy of the compliance framework. The FCA’s supervision of consumer credit firms has a strong focus on whether the compliance and risk function provides effective challenge to the business on conduct matters, and whether the management information provided to the board gives an accurate picture of conduct risk across the firm.

Key FCA References

• FCA Handbook CONC — Consumer Credit Sourcebook
• Consumer Credit Act 1974
• FCA — Consumer credit firms: our expectations