All financial services firms should by now have sought – and obtained – Board sign off of their Consumer Duty implementation plans, with the end of October 2022 the first key deadline in readiness for full implementation by July 2023.
The Financial Conduct Authority will want to see documentation of Consumer Duty plans from approval, right through to implementation as part of their regulatory oversight.
But a recent survey by Moneyhub found that two thirds of lenders were unprepared and some brokers don’t know what they can expect to support their own embedding of the duty.
It is important to remember that the Consumer Duty won’t replace the Treating Customers Fairly (TCF) regime, and TCF remains an important part of the customer experience. The new rules present a package of enhancements that are outcome focused and should be reflected throughout the whole customer journey.
Whilst the scope of the Consumer Duty is predominantly aimed at retail customers which, in the mortgage space means residential lending and consumer buy-to-let, Landbay recognises the fundamental importance of the duty which chimes with our values and culture.
Professional buy-to-let is not regulated but at Landbay we believe that implementation of the Consumer Duty is the right thing to do for our customers and our business. If your firm is unregulated, or deals in unregulated products, and you’re opting out of the Consumer Duty, you may want to think about the bigger customer impact and benefits that the heightened Consumer Duty standards could offer you.
I have to say we were following much of the sentiment of Consumer Duty before it was packaged as such. But what the new regime has done is focus our minds on making our processes more formalised and has crystallised plenty of step-by-step enhancements throughout our customer journey which will really bring these to the fore.
As a business we already map the customer journey and have various policies in place such as a vulnerable customer and conduct risk policy to support customers throughout their Landbay experience.
With the cost-of-living crisis, we continue to be mindful of any borrowers who may be struggling or about to struggle and watch for warning signs throughout and post-sale. The upcoming Consumer Duty will set a higher standard of consumer protection, but we believe that all firms should be stepping up now to help people in these difficult times.
The Consumer Duty will introduce a new Principle, three Cross-Cutting Rules and four outcomes. The four outcomes of the Consumer Duty are:
- Products and services
- Price and value
- Consumer understanding
- Consumer support
I won’t go into detail of them all but what is really important within this Consumer Duty is mapping out the whole customer journey from start to finish; including before the customer experience begins, to make sure these outcomes are served. And this applies from developing the products aimed at your target audience and marketing those products, in our case to intermediaries, right through to redemption of the loans.
Lenders also have to ensure they work with their distributors to support their own efforts in complying with the Consumer Duty. The lender/intermediary relationship is vital here as we rely on brokers just as their clients rely on them.
We can provide tools and management information to brokers to assist them and our new broker portal helps massively with this as it is intuitive and easy to use, without placing barriers in the way that prevent applicants using our services.
Monitoring of the end-to-end customer journey needs to be documented and backed up by data so you can show the FCA exactly what you are doing to comply with the Consumer Duty. This will also help to identify any gaps in your procedures and make it easier to see if improvements could be made to the customer journey as a first step.
Consumer Duty is not a tick boxing exercise, if carried out properly it will help you improve your business, it’s good for your reputation and your customers should be happy too.
Elle Worthington is head of risk & compliance at Landbay
