Credit Management September 2023

CONSUMER CREDIT
Stuff and Nonsense
Is the Consumer Duty a lot of fuss about nothing?
AUTHOR – Stephen Kiely
RE you ready for it? After
all, it has been coming
for a long time now, noone
could say that the
A.
industry has not been
warned. There have
been pages written about it, plans made,
strategies put into operation. So, I ask
again: are you ready for it?
The ‘it’ in question is the Financial
Conduct Authority’s (FCA) new rules on
Consumer Duty, which came into force
last month (31st July). The FCA intends
that Consumer Duty will require firms
to act to deliver good outcomes for
consumers and, in turn, help to improve
trust and confidence in the financial
services sector.
Under Consumer Duty, firms will
have to:
• Provide helpful and responsive customer
service – for example, it should be as
easy to complain about or switch and
cancel products or services as it was to
buy them.
• Equip their customers to make good
decisions through communications
people can understand, provided at the
right time.
• Provide products and services that meet
consumers’ needs and work as expected.
• Explain and justify their pricing
decisions. This includes being able to
demonstrate that rates offer fair value.
Indeed, Sheldon Mills, Executive Director,
Consumers and Competition at the FCA,
was eager to insist upon the importance of
this new obligation. He says: “Times like
this show why it is important people get
the support they need, as more people are
likely turning to their financial services
providers for help.
“Our Consumer Duty will guide our
ongoing work to improve the way firms
provide customer support - getting
through to your provider is the starting
point for receiving help, so we will be
working with them to improve in this
area.”
The problem
The difficulty, of course, is that such
proscriptions are rather general, as
the regulator prefers to set out general
concepts and let the industry decide for
itself on the details. This generality has
given some businesses the impression
that they do not really need to engage.
“Times like this
show why it is
important people
get the support
they need, as more
people are likely
turning to
their financial
services providers
for help.’’
Rather, they can let others do the hard
work of deciding on the details and then
only take action, at a later date, if the need
arises.
This attitude could prove to be a
recipe for disaster.
As Michael McCormick, Managing
Consultant at RSM UK, says: “While the
majority of businesses are well on their
way to implementing plans, businesses
that have been less engaged, or are not
sure whether the Consumer Duty applies
to them, should consider getting some
additional support to identify the biggest
risks within their business, and prioritise
those. Business leaders and board
members need to consider their role in
driving momentum with preparation
and post-implementation responsibilities
under the Consumer Duty.”
The FCA’s own research has identified
retail-finance providers and debt-advice
firms as the sectors least aware of how the
new Consumer Duty rules apply to their
business.
Mr McCormick adds: “The duty brings
into scope all regulated products and
ancillary services that are targeted at
retail consumers. This means that, while
financial services may not be their primary
function, if businesses are distributing
retail financial products, or conducting
regulated activities that involve engaging
retail consumers, they are in scope.”
Lack of information
There is clearly a need for additional
information in some parts of the industry.
Hodge Bank recently found that 61% of
brokers want more information about
Consumer Duty from financial providers.
Strikingly, nearly half (49 percent) said
they did not think Consumer Duty would
change the products and services they
offered, but, at the same time, a quarter
(25%) did believe it would materially
change the way they work.
Emma Graham, Business Development
Director for Hodge, says: “Many brokers
have said to us, anecdotally, that
Consumer Duty just feels like an extension
of Treating Customers Fairly, while
others are concerned about the extra
administrative burden it puts upon them,
especially those in smaller companies or
independent IFAs.
“What is clear is that brokers are keen
to be educated on Consumer Duty, with
three-quarters of those we surveyed going
out of their way to learn more.”
Brave | Curious | Resilient / www.cicm.com / September 2023 / PAGE 24