The Financial Conduct Authority (FCA) has just unveiled its latest regulatory refresh – FS25/2 – on 25th March 2025. For businesses operating in the consumer credit sector, this is more than just a policy update – it’s a chance to breathe easier as the FCA trims unnecessary complexity and sharpens its focus on outcomes-based regulation.
But one key change has firms sitting up and paying attention: the removal of pre-2022 Dear CEO letters. So, what does this mean for consumer credit businesses? Let’s break it down.
What’s Changing?
The FCA has decided to review and potentially remove outdated Dear CEO letters issued before 2022. While these letters don’t carry the same legal weight as formal rules, many firms have relied on them for practical guidance on key issues like affordability assessments, forbearance, and treating vulnerable customers fairly. The question now is: “What happens if these letters disappear”?
How Will This Impact Consumer Credit Firms?
1. Affordability Assessments & Responsible Lending
What’s Changing?
Pre-2022 “Dear CEO” letters emphasised responsible lending and affordability checks, warning firms about unsustainable lending practices.
Their removal could leave firms with less informal guidance, meaning a greater reliance on the Consumer Credit Sourcebook (CONC) and the Consumer Duty for compliance.
What Firms Should Do:
Ensure underwriting, affordability assessments and general lending practices align with the latest Consumer Duty principles.
Keep an eye on whether the FCA formalises any withdrawn guidance into official rules.
2. Forbearance & Treatment of Customers in Financial Difficulty
What’s Changing?
During COVID-19, multiple Dear CEO letters provided temporary guidance on forbearance measures, including payment deferrals and interest waivers.
If these letters are removed, firms will need to follow the latest Tailored Support Guidance (TSG) and Consumer Duty rules.
What Firms Should Do:
Review internal forbearance policies to ensure they remain fair, flexible, and compliant with the FCA’s latest expectations.
Make sure customer support teams are well-trained in vulnerability awareness.
3. High-Cost Credit & BNPL (Buy Now, Pay Later) Oversight
What’s Changing?
The FCA has issued past warnings via Dear CEO letters on payday loans, guarantor lending, and Buy Now, Pay Later (BNPL) products.
If these letters are withdrawn, firms will need to rely on sector-wide policy statements and upcoming BNPL regulations.
What Firms Should Do:
Stay updated on BNPL regulation developments to avoid compliance gaps.
Review your High-Cost Short-Term Credit policies to ensure they are both appropriate and importantly aligned with your operational practices across the board, and also ensure that these are aligned with FCA regulation, rules and guidance as a high risk sector to avoid compliance issues.
Ensure any high-cost credit products meet fair value assessments under the Consumer Duty.
4. Persistent Debt & Credit Card Market Rules
What’s Changing?
Pre-2022 guidance reinforced expectations for firms to proactively help customers in persistent debt.
Without these letters, firms must look to the Consumer Credit Sourcebook (CONC) and the broader Consumer Duty framework for direction.
What Firms Should Do:
Review and refine customer engagement strategies to ensure fair treatment.
Review your operational practices to ensure they are aligned with current guidance and regulatory expectations.
Monitor FCA updates for any new formal rules replacing withdrawn letters.
5. Vulnerable Customers & Fair Treatment
What’s Changing?
Older Dear CEO letters highlighted FCA expectations for treating vulnerable customers fairly.
With their removal, firms must fully align with the FCA’s vulnerability guidance. (FG21/1) and Consumer Duty.
What Firms Should Do:
Conduct a vulnerability impact review to assess compliance risks.
Review and strengthen your staff training programs to ensure teams are equipped to support vulnerable customers effectively.
What’s Next for Consumer Credit Firms?
How to Stay Ahead of the Changes:
- Conduct an Internal Review – Identify policies that rely on pre-2022 Dear CEO letters and update them accordingly.
- Engage with the FCA’s Consultation Process – Provide feedback to ensure critical guidance isn’t lost.
- Monitor Future FCA Announcements – Keep an eye on policy statements and formal rule changes that may replace withdrawn letters.
- Strengthen Compliance with Consumer Duty – Shift focus towards outcomes-based regulation, ensuring all customer interactions meet the FCA’s fair treatment expectations.
- Engage with ALPH Legal & Compliance – we can support you with all aspects of your business’ compliance, audit, policy, operations, and keep you up-to-date.
Final Thoughts
The removal of pre-2022 “Dear CEO” letters marks a shift in how firms interact with FCA guidance. While it may initially create uncertainty, it also signals a move towards clearer, more formalised rules rather than reliance on ad-hoc regulatory letters. By staying proactive, consumer credit firms can ensure they remain compliant while adapting to a leaner, more streamlined regulatory landscape.
Bottom line? Keep an eye on FCA updates with ALPH Legal, stay engaged with industry discussions, and make sure your compliance strategy is built on solid, up-to-date foundations!
ALPH Legal can assist with all aspects of your business’ compliance needs whether that be compliance structure and policy, internal/external audit, business and regulatory change support, authorisation, supervision or just some general expert advice and guidance!
Take action now with Alph Legal & Compliance services!
With all the regulatory shifts on the horizon, now is the time to act. Don’t wait until compliance gaps appear – engage with ALPH Legal today to ensure your firm is ahead of the curve. Whether you need tailored guidance, compliance support, or strategic insights to drive new business, ALPH Legal is your trusted partner in navigating FCA regulations with confidence.
Contact ALPH Legal now and take control of your compliance future!