Consumer Duty: What should creditors do after 31st July?

Consumer Duty is just weeks away. Years in the making, and with the deadline

now looming, there are plenty of businesses that will see these final few weeks

as the last big push to get ready.

So the big question, it would seem, is how many will succeed? All retail

consumer creditors offering a finance plan, from an independent furniture

company selling a sofa to a plumber installing a new central heating system,

will be affected. But how many, on 31st July, will be able to honestly say that

there is nothing they more could possibly do to support each vulnerable

customer they serve?

The honest answer, I expect, is this: Not many.

Of course, there will be some that simply arenʼt in the running. Those that

havenʼt taken the guidance seriously and urgently need to step up. But the

reality is that even the best will fall somewhere short. There will be few – if any

– in a position to genuinely support their vulnerable customers as Consumer

Duty might ultimately like.

If we take it at face value, this seems a fairly bleak prediction. But if we

interrogate it a little further, weʼll see that it doesnʼt need to be. The trap many

firms are falling into – not just in credit but in all industries – is viewing the

31st July as a finish line. Theyʼre operating under the assumption that if they

can put the required measures in place now, theyʼll be able to tick customer

vulnerability off their do-do lists and move on.

In reality, the end of July isnʼt a finish line. Instead, it should be seen as the

firing of a starting pistol, marking the beginning of a broader conversation and

understanding on vulnerability.

What is the FCA expecting?

Itʼs important to remember that, just like many of the firms rushing to put

Consumer Duty plans in place, the FCA is also new to monitoring vulnerability

outcomes. And while those who do nothing will certainly face repercussions,

the purpose of Consumer Duty isnʼt to punish firms that fall short. What the

FCA wants is for vulnerability to be taken seriously, in a way that one could

argue it previously hasnʼt. The regulator wants to see that the foundations are

in place, ready for us to build on as we develop our understanding.

This idea of development is crucial, when trying to determine where we go

next with Consumer Duty. The entire point is that supporting vulnerable

customers is something weʼll work on and improve at over time. So what the

FCA wants to see on 31st July isnʼt necessarily that everyone has every single

base undeniably covered. What it really wants is to see that weʼre all in the

race.

What do we do next?

If Consumer Duty is really about continuous improvement, then once the 31st

July has passed the goal should be for firms to look at the measures theyʼve put

in place so far and ask how they can go a step further.

For some, providing staff with vulnerability training might seem like the most

logical way forward. But while training is certainly important, it isnʼt

everything. In reality, identifying the most valuable improvements requires a

process of implement, test, refine and learn. We need to assess the data

gathered so far and interrogate it for ways we can improve going forward.

If this sounds daunting, the best place to start is with your own data. Even with

purely internal data, youʼll be able to see whatʼs missing and refine. However,

those who are most successful in their development will also have an external

view. So many rms are new to this process of collecting vulnerability data. If

there are thousands trying to solve the same problem, and to make the same

improvements, it makes all the sense in the world to look at other firms – even

other industries – and try to benefit from their learnings.

What does the future hold?

While some might have been looking forward to putting Consumer Duty

behind them this summer, the reality is that the topic of vulnerability is here to

stay. Over time, as we develop our understanding, the outcomes we deliver for

vulnerable customers will start to gradually improve. But we shouldnʼt expect

an overnight transformation. Weʼll be in escalation for years.

For those looking to make the most of the data available – whether itʼs their

own or from across the industry – a third-party specialist with a technology-

driven assessment tool can help to accelerate the process, removing bias and

subjectivity from the process, and ensuring consistency across a whole client

base. By combining clinical expertise with hard data, theyʼre able to reassure

firms that their systems and controls are affecting the change the regulator is

looking for.

In the long run, this process will benefit everyone; clients and firms alike. If

youʼre struggling, or if you know that you need to bring in additional expertise,

donʼt delay.