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Natasha Conradi 1
Written by
Natasha Conradi
Jun 13, 2023 Industry

Challenges and Opportunities of Consumer Duty

The FCA’s new Consumer Duty is the most significant change to UK consumer lending regulations seen since the aftermath of the last financial crisis. It aims to address areas where the FCA believes consumers are being let down, establishing higher standards for consumer protection and extending the current TCF principle.

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As the deadline for compliance rapidly approaches, firms are expected to already have the wheels in motion.

By 31st July 2023 all products that are open to sale or renewal must be brought up to standard, with the implementation deadline for closed products falling a year later. The standards required by the Duty will change the way almost every area of the business must operate, proving a substantial hurdle for many firms.

The majority of lenders we work with in the retail lending space have successfully launched tactical initiatives across their businesses to review processes, improve standards and evidence outcomes. In particular, we have seen a lot of focus surrounding the customer journey, ensuring that digital channels promote customer understanding and that agents are trained to appropriately handle vulnerable customers and collections cases.

There are still gaps, however

Whilst many lenders will be able to satisfy the basic requirements by the deadline, they may not necessarily be in the place they want to be, or need to be, going forward. After the initial implementation, the Duty has ongoing requirements that must be met, most notably surrounding reporting and evidencing good outcomes. This often requires an entirely new suite of monitoring and analytics reports, with challenges around defining appropriate quantifying metrics and integrating data sources such as open banking.

Although the focus right now for many firms is justifiably on the short-term, they shouldn’t disregard the long-term strategic requirements and opportunities presented by the regulation. As well as driving higher standards, the new Duty is an opportunity for firms to boost their data, analytics and insight capabilities. Improving customer outcomes does not have to be at odds with improving commercial ones; better pricing, clearer customer experiences, improved operational efficiency and a reduction in non-beneficial lending will all improve business as well as complying with the regulations.

Vestigo have been helping lending businesses fulfil their obligations under the new Consumer Duty, through engagements such as pricing analytics to assess value, defining and measuring customer outcomes resulting from product use, mapping the target market, and putting in place effective reporting.

For support in meeting the challenges posed by the Consumer Duty and getting the most out of your data, please get in touch.


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