A recent survey by AI-powered transaction analytics firm, Fuse, has raised concerns about lenders’ preparedness ahead of the upcoming Consumer Duty regulation, with 61% revealing they will need external assistance to comply with the new requirements.
The research also unveils a concerning trend, with numerous lenders reducing loan offerings due to the ongoing cost of living crisis, despite increasing consumer dependence on credit.
The Financial Conduct Authority’s (FCA) new Consumer Duty, set to be implemented at the end of July 2023, stipulates that firms must act to ensure good customer outcomes, verify these outcomes, and guarantee fair treatment for vulnerable customers.
Although 77% of lenders regard the regulation as a positive step towards enhancing borrower protection, 65% admitted they had not yet thoroughly reviewed the regulation requirements, with just two months until the deadline.
The readiness of the industry for these new rules has been brought into question, as over half of lenders (55%) confessed to being unprepared.
The implementation of these new rules coincides with challenging economic conditions, with 72% of lenders stating the regulation arrives at a financially demanding time for their businesses.
According to the survey, 58% of UK adults have utilised a credit product within the past year. A worrisome 21% of consumers rely on credit and loans for everyday expenses. However, due to the cost of living crisis, 22% of lenders have decreased their loan offerings.
Sho Sugihara, CEO and Co-founder of Fuse, said: “Lenders are under huge pressure to bring in the much-needed changes the Consumer Duty demands but, less than two months out, it appears the vast majority are unprepared.”
Sugihara emphasised the need for more support for lenders ahead of the Consumer Duty deadline. He also highlighted the critical role lenders play in helping millions struggling with rising costs. “In the long-term, the Consumer Duty needs to kickstart a transformation across finance to ensure it becomes more personalised and outcomes-driven for borrowers,” Sugihara added.
