FinCoNet publishes guidance to supervisors in the field of digitalisation of consumer credit

This guidance was developed to support and assist supervisors to effectively address the main drivers of financial consumer protection risks relating to the provision of short-term high-cost consumer credit through digital channels. It consists of eight main topics, each of which is supported by specific supervisory actions that may be followed by supervisors to ensure their proper implementation.

This work was developed by a FinCoNet committee chaired by Banco de Portugal consisting of representatives from Australia, Brazil, Canada, China, Germany, Indonesia, Ireland and the United Kingdom.

The topics are based on the findings of this committee published in the report on the Digitalisation of Short-term, High-cost Consumer Credit and follow the good practice observations described in FinCoNet’s Report on Responsible Lending.

The committee found that the digitalisation of consumer credit offers many potential benefits to lenders and consumers. From a consumer standpoint, digitalisation of consumer credit means consumers may benefit from increased convenience and speed in access to credit products. However, this digitalisation may also exacerbate consumers’ behavioural biases and increase risks associated with lending, such as the risk of over-indebtedness.

Against this backdrop, supervisors must keep pace with innovation and technological developments in the banking services sector, and they must adapt their supervisory approaches and oversight tools to promote sound market conduct and enhance financial consumer protection. Consumers should be afforded the same level of protection irrespective of the channels used to provide products or services.

About FinCoNet

FinCoNet is an international organisation of supervisory authorities which have responsibility for market conduct in the sale of retail banking products. Its main goal is to improve the protection of banking product consumers.

Banco de Portugal, as banking conduct supervisory authority, is a founding member of FinCoNet and is a member of its Governing Council, presently holding the Vice Chairmanship.