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Make sure you're confident with Consumer Duty

By Director of Mortgage Distribution, Martese Carton

Just over a year on from the final rules and guidance being published, the Financial Conduct Authority’s (FCA) new Consumer Duty regulation came into force on July 31st.

As mortgage professionals and lenders, it’s no doubt that this is something that we’ve all been focusing on during this time to ensure that our products and services meet the needs of consumers.

But to recap - how does Consumer Duty affect how you do business?

Being clear, fair, and supportive

Consumer Duty raises the bar for what's expected for customer outcomes, requiring financial institutions to consider how people behave and transact in the real world and ensure they have sufficient understanding of products and services. Under these new guidelines, institutions should act to deliver good outcomes for customers. To support the delivery of good outcomes, the FCA has set the following three cross-cutting rules:

  • Acting in good faith
  • Avoiding foreseeable harm
  • Enabling and supporting retail customers to pursue their financial needs.

The rules impact all firms which advise, distribute or manufacture products and services to retail customers and it’s now essential that your business aligns to the new standards set out by the FCA.

Additionally, you and your firm should consider how the rules impact staff as well as customers and ensure appropriate training is delivered and that Consumer Duty is central to your culture.

The four Consumer Duty outcomes

The FCA requires firms to consider the needs, characteristics and objectives of their customers - including characteristics of vulnerability and how these are evidenced. The rules are based around these four outcomes that the regulator will look at when it comes to how you work with your clients.

  1. Product and services – Ensure products and services are fit for purpose and designed to meet the needs of your target market, including those who are vulnerable or those with diverse needs.
  2. Price and value – Assess your products and services to make sure there’s value in both the price paid and the benefit a customer gets from it. Be clear on all the fees that you charge, too.
  3. Consumer understanding – Communications should support and allow customers to make informed decisions about financial products and services. This means supplying the right information to them at the right time and presenting it in the right way.
  4. Consumer support – Provide support that meets customers’ needs and helps them realise the benefits of products and services, taking into account the diverse needs of customers, including those in vulnerable circumstances, and making allowances where necessary.

Section 1.23 of the finalised guidance sets out what firms should do to ensure that customers in vulnerable circumstances experience outcomes as good as those for other consumers.

You should have already identified any gaps in your processes where you might not meet the new standards, and if you haven’t already, it’s important you address these as soon as possible. If you feel you still need some guidance and support on this, I suggest reaching out to the compliance teams of your firm, club or network in the first instance. It’s also worth referring to the guidance online at Consumer Duty | FCA.

It’s crucial that we continually assess and adapt the way we work where required so we can all help deliver great outcomes that serve customers in the best possible way.



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