Credit Management December 2022

CONSUMER CREDIT
AUTHOR – Jeanette Burgess
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The document is not a one-time obligation, rather, the FCA expects the duty to be reflected
in firms’ strategies, governance, leadership, and people policies. Senior managers will be
accountable for delivering the higher standards and good customer outcomes required by the
new duty within their areas of responsibility.
or as a result of their position in the
distribution chain.
What is foreseeable is dynamic: if
harm was not foreseeable at the outset
but later becomes foreseeable, firms
should take action to address it. Firms
therefore need to stay abreast of, and
respond to, new and emerging sources
of harm. Paragraphs 5.20 – 5.36 of the
guidance provide detailed information
and examples to explain concepts of
reasonableness and foreseeability, and
also include some important carve-outs
for firms. The guidance confirms that
a firm’s responsibility to avoid causing
reasonable harm can involve taking
proactive steps; not exploiting customers’
vulnerabilities, lack of understanding or
behavioural biases; and being clear and
fair when it comes to communications
with customers throughout the customer
journey and in relation to the description
of products and services.
Lastly, firms must enable customers
to pursue their financial objectives.
The actions a firm might need to take
to support customers in pursuing their
financial objectives will be determined by
the nature of the products or services and
what is within the firm’s control based on
its role and its knowledge of the customer.
Firms should take account of behavioural
biases and vulnerabilities and should
empower customers to make choices in
their own interests as per paragraphs 5.37
– 5.48 of the guidance.
Four outcomes
There are four outcomes that cover the key
elements of the firm-customer relationship.
The first is the products and services
outcome. The new consumer duty
requires all products and services to be fit
for purpose. That is, they must be designed
to meet the needs, characteristics, and
objectives of customers and targeted or
distributed accordingly.
Key questions which are likely to impact
a firm’s delivery of this outcome include
whether the firm has considered the
target market of its products and services
in sufficient granularity. Whether the
firm has satisfied itself that its products
and services meet the needs of consumers
in the target market and performed as
expected. How the firm has identified
if products or services could risk harm,
for example for vulnerable groups of
customers. Whether the firm is sharing all
necessary information with other firms
in the distribution chain and receiving
all necessary information itself. If the
firm is properly monitoring distribution
strategies. And if the firm is regularly
gathering, reviewing, or acting upon data
relating to this outcome.
Second is the price and value outcome.
This centres on consumers receiving fair
value. But value means more than just
price; it involves firms assessing products
and services “in the round” to ensure that
there is a reasonable relationship between
the price paid and the benefit a customer
receives. The FCA has confirmed that it
does not expect firms to quantify non-
Brave | Curious | Resilient / www.cicm.com / December 2022 / PAGE 11
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