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Only four months left: where to begin on Consumer Duty?

There are just four months left until Consumer Duty takes effect. During the last few weeks, the FCA has stepped up its efforts to reach those who aren’t yet engaging with Consumer Duty, and to bust the myth that firms don’t have to act. Despite what some might think, the incoming regulations won’t apply only to financial advisers. Any retail consumer creditor offering a finance plan, from an independent furniture company selling a sofa to a plumber installing a new central heating system, is part of the financial services landscape and is therefore affected. Avoidance tactics won’t cut it. Everyone has to act.


But with just four months left until the deadline, where should those who haven’t yet started begin? At this late stage, is it even possible to be ready in time?


The short answer is yes. It is possible.


In its most recent communications, whether they be via “Dear CEO” letters or “live and local” events, the FCA has been delivering a clear message: It’s all about data. Firms need to be capturing it, and they need to be using it to demonstrate they are Consumer Duty-ready.

For those who haven’t yet started, this might sound daunting. But it doesn’t need to be. There are two focussed steps that can be taken, today, which will accelerate plans to be ready in time.


Use what you have Every firm that offers a finance plan, no matter how large or small, will most likely have a business sales register. Containing information on every customer and the details of their finance arrangements, this is a great place to start, as firms can use the data they already have to see how they are delivering good outcomes for customers – or, conversely, how they are not.

For instance, how many calls does it take for you to answer the phone? That’s an example of customer service. Do you run price comparisons across your marketplace? If so, that’s a way to demonstrate you’re switched on to offering good value.


Whether it be sales data, customer service data, cancellations data, did-not-proceed data… By looking at it through a Consumer Duty lens, firms can often use data they already have in order to illustrate good outcomes for customers.


Those who are struggling to interrogate their data could consider the SCAAR methodology. First, the data to be seen. Then it has to be challenged, to ensure it’s accurate. Next, it has to be analysed, and that analysis has to be actioned. Finally, this work has to be recorded. If a firm can demonstrate that it’s taking these steps, it will be on its way to demonstrating that it has properly engaged with Consumer Duty. And if nothing else, this exercise will help to identify what additional data might be needed.


Gather vulnerability data The second step, which the vast majority won’t already have taken, is gathering vulnerability data.


There are two reasons firms are behind on this. The first is the alarming reality that a large number genuinely don’t believe they have any vulnerable customers. The second is that although there has been a vulnerability agenda for several years, precious little data has been captured, for the simple reason that the guidance on offer has never been tested. That’s where Consumer Duty comes in. The FCA now expects firms to start measuring vulnerability data and demonstrate that those in vulnerable circumstances receive the same outcomes as everyone else.


So the second step that needs to be taken is to start building datasets on vulnerability. This is a more complex task, especially for those planning not only to start from scratch, but to try doing it themselves.


First, there needs to be an understanding of the four drivers of vulnerability, as well as the fact that each pillar has multiple facets. This is particularly true of resilience and mental capacity, which are inherently clinical assessments. Then comes the challenge of actually identifying vulnerable customers. What makes this part difficult is that no matter how vulnerable the circumstances we might find ourselves in, we’re predisposed to not admit it when asked. How, then, can you ensure you’re making the right assessment? And how do you go about recording it all?


It isn’t impossible to do this yourself. Training is available and the FCA has published plenty of information for those beginning their implementation journey, updating this regularly in response to questions from the community. Elsewhere, industry bodies have published their own support guides to help get plans on track. But for a small-to-medium-sized firm caught under the Consumer Duty, in which the brokers and appointed representatives aren’t already trained clinicians, to start thinking about this from scratch – and with just four months to go – will be exceptionally difficult.


Instead, technology-driven assessment tools exist that can help to identify financially vulnerable customers, removing subjectivity from the process and ensuring consistency across a whole client base. These kinds of solutions are, arguably, the only way to ensure all vulnerability drivers are in scope, especially at this late stage. By combining clinical expertise with hard data, they’re able to reassure firms that their systems and controls will adequately meet the scrutiny of regulatory requirements.


So, for those who haven’t yet acted on the Consumer Duty, the good news is that with these two steps it’s possible to get ready in four months. But what’s been made clear is that the FCA will allow no exceptions. Action has to be taken, and it has to be taken today.


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