On 6 August 2020, the Financial Conduct Authority (FCA) published a report setting out review findings of relending by firms in the high-cost lenders portfolio. The FCA also commissioned a study by PWC as an aid to understand repeat borrowing in the high-cost credit market.


In March 2019, the FCA issued a Portfolio Strategy letter, highlighting key risks that firms within the high-cost lenders portfolio pose to their customers or markets. From this review, high volume of relending was identified as one of the key ways consumers may be harmed. Subsequently, the FCA prioritised diagnostic work to better understand the motivation for, and impact of, relending on both consumers and firms.

The new findings apply to high-cost lender portfolio firms offering the following products:

  • guarantor loans
  • high-cost short-term credit (HCSTC)
  • high-cost unsecured loans aimed at subprime customers
  • home-collected credit (HCC)
  • logbook loans
  • rent-to-own (RTO)


Below are the key takeaways from the FCA’s findings:

  1. Relending and customer outcomes – firms should ensure that relending leads to positive customer outcomes and does not cause harm. For example, the FCA noted that a number of high-cost short-term credit (HCSTC) firms enter into administration as a result of liabilities for complaints, depicting the consequences for firms that fail to adequately assess affordability or relend in a way that is sustainable for their customers. HCSTC customers are more likely to be vulnerable, have low financial resilience and poor credit histories, therefore firms are not to encourage refinancing of credit agreements where the customer’s commitments are not sustainable. Firms are also expected to only agree to refinance if they reasonably believe that it is not against the customer's best interests to do so.
  2. Increasing levels of debt and repayments – the level of debt and repayments can increase significantly, to the point where it is no longer sustainable. The FCA reminds firms of the Dear CEO letter from October 2018, sent to all HCSTC firms. Firms must not encourage a customer to refinance a regulated credit agreement if the result would be the customer's commitments are not sustainable.​​ The FCA suggests that additional borrowing should not be used as a debt management solution.
  3. Relending, profitability and consumer harm – relending accounts for a high proportion of business and drives profitability in many firms, which gives rise to customer harm. The FCA reminds firms of their requirement to lend responsibly and to be mindful that repeat lending has the potential to lead to poor customer outcomes.
  4. Marketing activity and customer behaviour – firms’ marketing activity can adversely influence customer behaviour. The FCA expects to see marketing content contain all relevant information that is sufficient to support customers to make informed decisions regarding additional borrowing.
  5. Marketing materials – should be clear, fair and not misleading. Firms should not exploit customer bias to adversely influence customer behaviour and cause harm. The FCA asks firms to review their marketing materials and make any necessary amendments to ensure they are not misleading. Additionally, firms should make sure to meet specific requirements for financial promotions as set out in CONC 3.
  6. Online account messages – certain online account messages encouraging customer to reborrow could constitute marketing and must not restrict access to customer accounts. The findings highlighted that some firms do not consider that online account activity to offer additional credit to customers constitutes marketing. The FCA clarifies that any communication offering additional credit to a customer constitutes marketing and is subject to both FCA requirements on financial promotions as well as data protection laws around privacy.
  7. Refinancing loans – customers should be able to make informed borrowing decisions. The FCA notes that home-collected credit firms should make sure to explain different relending options and associated costs to customers before they take additional borrowing, due to the more vulnerable and financially stretched customer base.
  8. Early settlement charges – should not be charged when a customer refinances their loan. When firms make an early settlement charge as part of a refinancing, the charge is added to the new loan and so interest is charged on this charge. This means that if the credit is refinanced several times, the costs compound. The FCA expects firms to stop requiring or encouraging the borrower to serve the statutory notice when refinancing immediately.

Next steps

The FCA expects firms to review their relending operations in the light the findings above and as a result, make any necessary changes.