Key Takeaways from the inaugural Fuse Consumer Duty and Vulnerability Summit
- Broad consensus that further efforts to segment customers to detect vulnerability and track appropriate MI are needed, with more best practice sharing required between lenders.
- Suggestions that the ultimate success of Consumer Duty will be impacted by how much sway a firm's Consumer Duty Champion will have at board level.
- We should expect close compliance monitoring from the FCA after the implementation deadline has passed.
- The FCA has provided detailed and sufficient guidance to lenders in the run up to the implementation deadline.
Last week, Fuse hosted the first in a series of industry roundtables. Our inaugural session was titled The Consumer Duty and Vulnerability Summit, and held to mark the launch of our new report on consumer vulnerability.
We were privileged to be joined by senior figures from across the lending, banking, and not-for-profit sectors, who contributed to a lively discussion.
As a group, we discussed the state of play for UK consumers, the role of lenders in supporting borrowers, and the incoming Consumer Duty - notably the steps that lenders are taking to ensure compliance and how it may impact the sector longer term.
Lenders want to do more for vulnerable customers
With wage stagnation, high-interest, and ongoing inflation, it is a bleak picture for UK borrowers. While lending won’t alleviate poverty, access to responsible and affordable credit has a clear role to play in supporting consumers through this financially challenging time.
There was a general consensus that continued efforts by lenders to segment and identify vulnerable customers were needed. Ensuring the right systems and Management Information (MI) are in place for lenders to support and empower these individuals was an area many lenders were focused on.
Looking ahead, continued best practice sharing - both internally and across the financial ecosystem - will be essential to helping to build a more outcomes-based lending sector that has the borrower’s best interests at heart.
There were opinions that driving true compliance and building a more consumer-focused model for finance requires decision-making to be influenced from the very top. The actual influence a firm’s Consumer Duty Champion can have on decision making may be a true test of the Duty’s success in changing behaviours.
The role of the regulator
In contrast to our research, which found that 67% of lenders feel there hasn’t been enough support from the FCA regarding the implementation of their new rules, many lenders in the room agreed that the FCA had provided clear guidance and support that has been instrumental in helping them to meet the requirements.
There was also alignment in thinking that the FCA will monitor compliance with the Duty closely from August onwards, with potential penalties to be expected on select non-compliant firms once the deadline and grace period have passed.
Cultural change will also be important
As well as ensuring the right technology and back-end systems are in place to ensure regulatory compliance at an operational level to enable the appropriate segmentation of target customers and tracking of MI, the group felt there is a job to be done - for larger organisations particularly - to drive a wider cultural change to support this transition.
This may mean running internal training programmes for customer facing employees to ensure they are equipped with the right language, knowledge, and understanding to prioritise the customer’s long-term financial wellbeing in all decision-making processes and conversations, therefore driving them towards better outcomes.
This was a fascinating discussion, with attendees offering a variety of perspectives highlighting the different approaches across the industry when it comes to supporting borrowers.
The aim is that these sessions become a regular fixture in the calendar as we continue to drive collaboration and share best practice. If you're interested in coming along, reach out to us at firstname.lastname@example.org.
Fuse's Vulnerability Report - "It's time to redesign our financial system" - covers topics including financial vulnerability and the Consumer Duty. You can read it here.