Industry Thoughts

Ensuring customers have an appropriate degree of protection is central to the FCAs mission. Under the Vulnerable Customer Guidance (FG21/1), the FCA expects vulnerable customers to receive outcomes equal to the treatment of other customers. Treatment must be consistent and fair across the end-to-end product and customer lifecycle. The FCA’s focus on vulnerability continues to sharpen. In March 2024, they commenced a two-stage review into how firms are supporting vulnerable customers. Last month Graeme Reynolds (Director of Consumers and Competition) outlined that some firms have failed to think about vulnerability proactively and need to act imminently. With findings from the review due to be shared by the end of 2024, this couldn’t be more clear. Under Consumer Duty, the FCA expects firms to: ensure colleagues have the right skills and capability to recognise and respond to the needs of vulnerable customers understand and respond to customer needs throughout product design, flexible customer service and communications monitor whether they are responding to the needs of customers with characteristics of vulnerability, making improvements where this is not happening. Challenges faced by firms Based on our research and working with firms across the market, firms face a number of challenges in supporting vulnerable customers, including: Identification difficulties: Vulnerable customers may not self-identify, and hidden vulnerabilities can be challenging to recognise. Communication barriers: Complex language, inaccessible formats, and digital exclusion can hinder communication and service access. Inadequate staff training: Lack of awareness and inconsistent handling can lead to inappropriate responses and missed signs of vulnerability. Insufficiently tailored products and services: Rigid processes, unsuitable products, and inflexible payment options can exacerbate customer difficulties. Data privacy concerns: Balancing requirements for customer information with data privacy. Operational challenges: Resource constraints, lack of coordination, and inadequate monitoring. Overcoming challenges To overcome these challenges, ensuring vulnerable customers receive meaningful support, and good outcomes, consideration should be given to: Robust Vulnerable Customer Operating Model: Encompassing identification, customer interaction, product design, governance, and continuous improvement. Staff training: Equipping colleagues with the skills to effectively recognise and respond to customer vulnerabilities. Inclusive products and services: Adapting products, services, and communication methods to meet the diverse needs of vulnerable customers. Technology: Utilising analytics, machine learning, AI, and digital accessibility tools to enhance identification, communication, and support delivery. Customer-centric approach: Prioritising fair treatment of vulnerable customers through dedicated support services, accessible communication channels, and tailored solutions. Effectively supporting vulnerable customers can enhance reputation, drive business growth and innovation, improve risk management and foster a purpose-driven culture. For more information, download our ‘Supporting Customers in Vulnerable Circumstances’ white paper.

Amid continued economic uncertainty and an unexpected inflation rise to 3.9% in January, many UK residents are turning to borrowing to help manage their money and make ends meet. In fact, our research found that one in five UK adults – approximately 11 million people – now consider themselves financially vulnerable and at risk of harm due to their personal circumstances, including poor health, life changes like new caring responsibilities, or difficulty handling financial or emotional stress. For the financially vulnerable, economic shocks, such as an unexpected bill or a small dip in income, can have a significant impact on not only their financial health, but also on their wellbeing. With nearly seven in ten financially vulnerable people feeling stressed when dealing with their finances, it can be harder for these consumers to make informed financial decisions, putting them at greater risk of fraud and scams. Credit is often a lifeline for vulnerable consumers to meet shortfalls in their finances. However, many can’t access the credit products they need – with low credit scores being cited as the most common reason that people had their credit application turned down. This is where fintechs and financial service providers have a critical role to play. The industry needs to shift from a one-size-fits-all approach to lending, to one that recognises and adapts to the challenges vulnerable consumers face. Lenders should harness data to offer financially vulnerable customers the care and support they need to make informed credit decisions and improve their financial wellbeing. We’re already seeing some innovation in this space, with fintechs developing tools that provide personalised financial insights, helping people take control of their money. Leveraging vulnerability and affordability insights can enable lenders to provide access to lower-cost credit and preventing borrowers from falling into problem debt. We are the first credit reference agency to partner with the Vulnerability Registration Service, giving our clients access to an independent register of vulnerable individuals. This enables them to identify vulnerabilities and make informed decisions in accordance with regulatory guidance. Ultimately, a fair and inclusive financial system is one that balances credit access with consumer care and protection. Through responsible lending and access to credit products tailored to the needs of financially vulnerable consumers, the industry can foster greater financial inclusion to ensure each consumer is reliably and safely represented in the marketplace. At the same time, businesses can empower consumers to avoid unmanageable debt and build financial resilience.

In the competitive landscape of alternative lending, trust is not merely an asset; it is a necessity. As consumers increasingly seek clarity and fairness, lenders must step up their game, creating a transparent environment where borrowers feel informed and secure in their decisions. The key to achieving this lies in the integration of effective decision systems that prioritise transparency, ultimately fostering stronger relationships between lenders and borrowers. Transparency in lending means more than just clear communication; it involves a commitment to openness about policies, decision-making criteria, and the inherent risks of borrowing. Transparency in lending … involves a commitment to openness about policies, decision-making criteria, and the inherent risks of borrowing. For consumers, understanding loan terms, approval factors, and potential costs is crucial for making informed financial choices. When lenders fail to communicate transparently, it can lead to confusion, dissatisfaction, and distrust, damaging customer relationships. Enter decision systems, which are significantly transforming how lenders interact with borrowers. By leveraging data analytics and automation, these systems establish clear, objective criteria for evaluating loan applications. Envision a world where consumers fully understand the factors that influence their loan approvals, providing them with clarity and confidence in their financial decisions. This transparency not only alleviates uncertainty but also fosters a sense of control throughout the lending process. 1. Standardised Criteria With decision systems, lenders can develop standardised criteria for assessing borrower eligibility. When borrowers understand the elements that influence their applications, they feel informed about their chances of approval and the rationale behind decisions, reducing anxiety and uncertainty. 2. Real-Time Feedback Decision systems also offer real-time feedback during the application process. This means borrowers receive immediate updates about their application status, required documentation, and potential hurdles. Such proactive communication instils a sense of involvement and reassurance, making borrowers feel valued and informed. 3. Data Transparency These systems also provide insights into how and what types of data are used for evaluations and the weight assigned to each factor. This transparency builds confidence in the system and demonstrates a commitment to ethical lending practices. But it’s not just about technology; it’s about ethics. Trust is built on a foundation of ethical behaviour and lenders must prioritise responsible practices to cultivate lasting relationships with borrowers. Decision systems that emphasise transparency align closely with these values, creating accountability within organisations. Clear documentation and decision-making processes help ensure fair treatment of applications, mitigating the risk of bias. Incorporating feedback mechanisms allows lenders to listen to their borrowers, fostering a culture of continuous improvement. This dialogue enables lenders to refine their processes based on real experiences, further enhancing trust. Call to action The call to action is clear: embrace transparency through effective decision systems. By committing to open communication, standardised criteria, and ethical practices, lenders can create an environment of trust that benefits everyone involved. Together we can build a lending market where consumers feel empowered to make informed financial choices, ensuring a brighter future for borrowers and lenders alike.

The Bankruptcy and Diligence (Scotland) Bill was passed by the Scottish Parliament on 6 June 2024. It is not yet known when it will come into force, but an important milestone has been passed. The Bill brings into force an important new measure in debt recovery in Scotland, namely the introduction of a Mental Health Moratorium. Separate regulations as to how the moratorium will work in practice were published in May 2024 and a public consultation will follow. Based on those regulations, we are able to gain some insight at this stage as to how the moratorium will work. Applications will be submitted to the Accountant in Bankruptcy (‘AIB’) in Scotland and can only be submitted by a money adviser. The person for whom the application is being made cannot be in any other form of debt solution at the time and must meet both the mental health and the debt criteria set out in the regulations. The bar has been set high in terms of the mental health criteria which must be satisfied to qualify for the moratorium. The individual has to either be subject to certain orders, certificates or directions under the Criminal Procedure (Scotland) Act 1995 and the Mental Health (Care and Treatment) (Scotland) Act 2003 or, if they are voluntarily or otherwise receiving equivalent emergency, crisis or acute care or treatment in the community from a specialist mental health service in relation to a mental illness of a serious nature, they will qualify. For the debt criteria to be satisfied, a mental health professional must confirm essentially that the individual is dealing with debts in such a way that they are causing or contributing to their mental illness or affecting the individual’s recovery. The mental health professional is required to sign the application for the moratorium and confirm the criteria have been met in writing. If the application is granted, the AIB will issue notification of the start date to relevant parties including all creditors known to the AIB. If creditor details have not been provided in the application, a credit check will be carried out on the individual. The individual’s name will also be added to the new Mental Health Moratorium Register. The moratorium will last for six months but the mental health professional who signed the application has a duty to notify the AIB if they become aware the individual no longer meets the criteria. The moratorium can be continued if the criteria are still met and the AIB must request confirmation from the mental health professional, before the end of the six months, whether the individual still meets the criteria and if so, the moratorium will continue. Once in place, the impact on creditors is as follows: No enforcement action can take place, and this includes trying to contact the individual No interest, fees or charges which may accrue during a moratorium period can be claimed The creditor must carry out a search of their records once notified of a moratorium to identify …

“Complaints! It’s easy, right?” As industry representatives, we often hear this. At its core, handling complaints is about addressing customer needs and restoring faith in the brand, epitomising ownership. However, to keep it “easy,” you need robust planning and implementation, which is anything but easy. Drawing from my experience, this article outlines a strategic framework to help you navigate the complexities of consumer complaints handling, ensuring you are on the right path to success. UNDERSTANDING REGULATORY REQUIREMENTS In the UK financial services sector, managing consumer complaints requires adherence to regulatory frameworks such as the FCA’s Consumer Duty, DISP, CONC, and SYSC. Navigating these regulations confidently is crucial for producing a compliant function. Partnering with Compliance is essential; they are critical allies in developing and maturing a frontline complaints operation. BUILDING A TARGET OPERATING MODEL An optimal and effective Target Operating Model (C-TOM) must efficiently and compliantly address consumer complaints, inform the business of lessons learnt, and continuously improve process efficiency and control. Key components of an effective C-TOM include: 1. Governance and Leadership Establish clear roles and responsibilities, accountability structures, and oversight mechanisms. The board and executive leadership should prioritise customer outcomes, regularly review complaint trends, and challenge the business on complaint handling. 2. Complaint handling process Implement a streamlined, customer-centric, and transparent process aligned with regulatory requirements. This includes triage, prompt acknowledgement, thorough investigation, clear communication, and an escalation process for unresolved complaints. 3. Regulatory compliance Ensure full compliance with DISP, CONC, the Consumer Duty, and SYSC. Regularly train colleagues on regulatory requirements, integrate compliance into outcome testing, and conduct regular audits to ensure processes meet standards. 4. Systems and technology Invest in a robust Complaint Management System (CMS) to centralise information, track complaint status, and generate reports. Utilise automation to streamline tasks and data analytics to identify trends and areas for improvement. 5. People and training Right-size the team, hire individuals with the right skills, and provide comprehensive training on complaint handling procedures and regulatory requirements. Regularly review performance metrics and support colleague well-being. 6. Feedback and continuous improvement Perform root cause analyses on resolved complaints, regularly review processes, establish feedback loops, and benchmark against industry standards. Use these combined insights to drive continuous improvement. 7. Engage with regulators and external bodies Maintain clear communication and collaboration with the Financial Ombudsman Service (FOS) and the Financial Conduct Authority (FCA). Handle requests from claims management companies (CMCs) and professional law firms promptly and accurately. 8. Customer feedback and reputation management Monitor online reviews and social media to staying informed about customer sentiments. Address negative reviews promptly and constructively. Maintain a watching brief on emerging issues. 9. Executive office escalation team Establish a team to handle high-priority and complex complaints, ensuring swift resolution and executive oversight. 10. Process for vulnerable customers Develop procedures for identifying and supporting vulnerable customers, provide mechanisms for signposting support services, and ensure complaint-handling processes can adapt to their specific needs. By investing strategically in these areas and maintaining a proactive approach to customer feedback and …

n the ever-evolving landscape of cyberspace, legal disputes can arise where the identity of the alleged wrongdoers are shrouded in anonymity. These disputes present unique challenges for the traditional legal frameworks, particularly determining accountability. A case that has explored this area further is Mooij -v- Persons Unknown. The judgment not only underscores the complexities of holding unidentifiable persons accountable but also provides much needed guidance on effecting service on unknown defendants and the approach to be taken by the court on liability issues in such scenarios. BRIEF SUMMARY OF THE FACTS Mooij was a case heard in the High Court of England and Wales which centred around cryptocurrency theft. The claimant, Mr. Mooij, was deceived into transferring Bitcoins and €330,000 to fraudulent entities, prompting him to seek legal recourse, including an initial freezing injunction. He also pursued related claims against the unknown defendants, including for proprietary relief and a money judgment for the value of the lost assets. Unsurprisingly and characteristically for such disputes, none of the defendants participated in the court proceedings. KEY ISSUES AND FINDINGS OF THE JUDGE The case raised fundamental questions about jurisdiction, identification, and liability in the digital realm. The Court made an order permitting alternative service on the defendants. It was held that the sole intent behind serving legal proceedings, regardless of the method used, was to establish the Court’s jurisdiction over defendants. This encompassed individuals who were considered served but opted not to recognise the Court’s jurisdiction. In this case, creative methods such as NFT airdrops into target wallets and filing documents at Court were deemed effective service. This case illustrates that the courts are more than willing to adopt creative alternative methods for serving legal documents and establishing jurisdiction in these matters. The High Court affirmed that although enforcing the judgment might pose challenges, the inability to identify a defendant at the time of judgment did not hinder the Court from exercising jurisdiction to grant relief, including issuing a final monetary judgment. In doing so, the court distinguished from the court in Boonyaem -v- Persons Unknown Category A, a similar case focussed on digital asset fraud, in which held that the Court should not give judgment for any non-proprietary relief to unknown defendants. In Mooij, the High Court held that the defendants had failed to present a viable defence due to their complete lack of engagement in the proceedings, and that there was no reason for the jurisdiction established against them through court-directed alternative service not to result in the desired outcome pursued by the claimant. Again, an eminently practical approach. PRACTICAL IMPLICATIONS Mooij highlights the evolving nature of legal and technological landscapes. Whilst it might be anticipated that the courts may struggle to keep pace with rapidly evolving technologies, such as cryptocurrencies, and their implications for legal frameworks, enforcement and remedies available to claimants, the courts have in fact proved extremely adaptable to dealing with such issues. The ruling in Mooij represents a further step towards enhancing accountability in the digital …

A year ago, my colleague Rob Oxley wrote in a CCTA Magazine article that “a one size fits all approach to consumer debt recovery isn’t effective” but accepted that “a fully tailored approach to each and every customer isn’t possible – or at least not without access to quality data.” In 2024, there’s no doubt that customer data is king. But, in the ‘techy’ age, there is often a misconception that the most valuable data comes from digital sources. While data needs to be digitised to get the maximum value from it, it also needs to be accurate and authentic and, when we forget about real people and their real circumstances and rely on just what the digital data is telling us, we don’t get the full picture. We’ve taken a doorstep-driven approach to digital data gathering which has enriched and enhanced the quality of our data to enable a truly tailored approach. Since we launched Verify, Perch Group’s ‘intelligent’ field services firm, in August 2023, we’ve taken a doorstep-driven approach to digital data gathering which has enriched and enhanced the quality of our data to enable a truly tailored approach. So, while Verify’s customer reconnection and verification team has been able to draw on Perch Group’s existing data to make better informed approaches to the hardest to reach customers, we’ve also been able to feed intelligence back into the wider debt lifecycle that we’ve gathered on the doorstep. This is where the benefit of our full-service, fully integrated, Group-wide approach to debt resolution really comes in. Of the domestic and commercial customers visited on the doorstep: 17% couldn’t read or write in English 23% had a visible vulnerability 37% didn’t understand what a QR code was or how to use it 14% relied on their children’s technology to access the internet 28% didn’t know what a credit file was or how it would affect them While we knew there were customers who were digitally excluded, we didn’t know the extent of it until we reached out to them ‘in the field’. The intelligence gathered through our welfare and reconnection visits, isn’t something we could ever get from a database – until now. By feeding all this insight back into our customer data platform, we’re able to build a rich tapestry of information about specific circumstances that can inform not just our field strategies but our wider debt collection and litigation strategies to ensure the best possible customer outcomes. When we say that Perch Group is ‘powered by technology, driven by people’ we really mean it. While we utilise the absolute latest technology from our state-of-the-art field services app and case management system, to the use of field audio and QR codes, we also know that we are dealing with real people and they need a people-centred approach. There doesn’t need to be such a thing as ‘computer says no’ when you are face-to-face with a customer. When we set out to revolutionise field services with Verify, we took a …

Credit is an emotive subject, especially when it is used by lower income households. When used in the wrong way, credit can lead to bad outcomes. It should not be a substitute for better wages and social security benefits. It can be harmful and lead to problem debt, court action and increased anxiety and misery. However, in our experience, credit (when appropriate), can be hugely valuable to some households, including those on lower incomes. Credit can smooth income, alleviate immediate pressures and help with household budgets. At Fair4All Finance we are concerned about the changing shape of the consumer credit market; specifically, a growing unavailability of regulated credit for lower income households. We believe that the shape of the credit market is as important as the size. The market needs to serve people on a wide range of incomes and across all housing tenures. However, in the past decade things have changed. Whilst the size has returned to pre-pandemic levels of around £227billion in outstanding consumer credit and credit cards, our evidence is that the shape of the market is changing. Research undertaken by Ipsos indicates that the poorest households and those in rented accommodation are less likely to be approved for credit and as a result are more likely to make decisions on how to meet their credit solutions in sub-optimal ways including relying on selling goods, going without, missing bills, or even using loan sharks. Our research is supported by reports from LEK Consulting, who identify a non-standard credit need of £7bn, of which they think a £2bn gap could be commercially met. Clearscore and EY also said the credit market is “failing non-prime borrowers.” A decade ago, lower income households, accessed forms of higher cost credit such as home-collected and high-cost short-term credit. These products, along with rent-to-own represented around 4% of outstanding regulated consumer credit. Last year these products accounts for under 0.4% of all outstanding credit. In just five years that’s a reduction of 3.5 million loans worth £1bn. This is in the period that included the impact of a pandemic and cost-of-living crisis which disproportionally affected lower income households. So where have these borrowers gone? Part of the answer appears to be the explosive growth in the use of Buy Now Pay Later (BNPL) which is now used by 27% of adults, including a percentage who held higher cost credit, and a percentage of BNPL borrowers who ought not to be accessing the credit but legislation means that their exposure to the product is not visible. BNPL usage included 44% renters and 14% of people with an income under £15,000. The same FCA report says high cost loans were accessed by 53% of renters and 23% by those with incomes under £15k. Analysis by the FCA in 2023 reports that just over four in ten of any BNPL holders in past twelve months also accessed high cost loans. So, there may be some drift from forms of high cost credit to BNPL. Denial of …

Lantern discuss their Consumer Duty journey so far and reflect on the last twelve months. The thought process and actions taken regarding their Annual Report are also considered. HOW DID YOU FIND THE JOURNEY OVER THE LAST YEAR? Once we got our heads around the cross cutting rules, and mapped them to each of our business areas, processes and policies, it felt pretty straight forward. Getting to that stage however was a little more difficult as it was extremely time consuming for colleagues, on top of business as usual. We took the decision from the start to join everyone in the company into the process, to ensure all colleagues understood what the Consumer Duty was, what it was designed for and how it impacted each particular role, and then the wider business. WHAT WERE SOME OF THE THINGS YOU CONSIDERED? Our gap analysis began in 2022, with the bulk of the work undertaken in 2023 and a check-in with Deloitte (outsourced internal audit) mid 2023. As the Non-Exec Chairwoman (previous CEO), the business selected me to be our Consumer Duty Champion (CDC). This was due to having knowledge of the operation whilst also bringing independence. 2024 has been a time for adjusting and further embedding, following external feedback and using the Chair/CDC suggested questions on the FCA website, which we incorporated into our report. WHAT IS INCLUDED IN YOUR ANNUAL REPORT? The Management Information (MI) required around the Consumer Duty has largely been part of our Board and Executive packs over the last five years, so it made sense to retain and enhance it further, rather than starting again. In November 2023 we began to segregate the focussed Consumer Duty MI into a dedicated ‘CD pack’. This covers all elements and highlights aspects of the business which could have a harmful impact on the customer. Discussion around the Consumer Duty at Board is given the same amount of airtime as the financial section to ensure we discuss consumer impact thoroughly. The CD pack contains Key Performance Indicators around kept rates, income and expenditure capture, vulnerability flags, engagement rates, payment values and channels, expression of dissatisfactions and complaints, etc., (mirrored to some of the regulatory data submissions to the FCA). We’ve also included stats on recruitment, agent scores, attrition, training and competency, IT/system infrastructure reports, third party management, data suppliers and incident logs. This whole pack gives a clear picture of our position each month and importantly trends over time. HOW IS THE ANNUAL REPORT COMING ALONG? It’s around twenty pages, with fifteen to twenty pages of appendices/back up data/evidence. The report gives detail on the changes made between July 2023 and today, and focuses on information around operations and service, but also around culture. We recently ran the ‘almost’ final report past Deloitte, as a further sense check which results in a couple of further recommendations. A dry run took place at the June Board meeting, ready for the final report in July.

The FCA’s focus on the content and quality of wind-down plans (WDPs) continues, most recently with the regulator creating a new webpage in March 2024 advising firms how to prepare effective WDPs. All firms are expected to have a WDP in place to enable a firm to cease its regulated activities with minimal adverse impact on its customers, counterparties and the wider markets. The new webpage advises firms on the required components of a WDP. This includes identifying the steps and resources a firm will need to wind-down its business, especially in a situation where resources are limited, and evaluating the risks and impact of a wind-down and considering how to mitigate these risks to continue to achieve an effective wind-down of the entity and its business. However, the FCA has frequently been vocal when WDPs do not meet their expectations. In November 2023, the FCA published detailed feedback outlining good and poor practices in WDPs as part of their concluding report on Investment Firms Prudential Regime implementation observations. While this feedback was targeted at investment firms, we review and advise on WDPs across all financial services (FS) sub-sectors and these comments from the FCA resonate with what we see in the wider FS market, including consumer credit firms. GOOD PRACTICES IDENTIFIED INCLUDE: WDPs being sufficiently detailed to identify business as usual costs, wind-down driven costs, and cashflow mismatches. This often means a firm being required to prepare a financial model for a wind-down covering off how working capital will be managed at a minimum. Testing through simulations or ‘war games’, i.e. detailed scenario considerations of the implementation of any wind-down. In addition to formal triggers on capital and liquidity, using non-financial triggers, for instance, on reputational risk or key client concentration. Appropriate consideration of group WDPs and any trigger points contained therein, as well as the order with which the affected legal entities would be wound down. This includes highlighting and addressing group interdependencies whether through systems and processes, people or legal contracts, and with group entities providing critical services who are themselves in wind-down. POOR PRACTICES IDENTIFIED INCLUDE: WDPs not being updated for years. We recommend an annual review, or at a point of any material change to the business. WDPs and cost assumptions not being aligned. This can be supported through improved financial modelling. Using unrealistic assumptions, particularly the activation of the wind-down being assumed to take place under normal, instead of stressed conditions. This means the possibility that liquid assets and own funds have been depleted by a prior restructuring attempt when wind-down commences has not been considered. Often WDPs are prepared with a regulatory mindset and require the economic and commercial overlay driven by theoretical distress. Group dependencies not being comprehensively considered and assessed, or the impact of group WDPs on shared systems, costs and resources not considered. IN CONCLUSION The overarching objective is for a WDP to reduce any risks of negative impacts on a firm’s customers and market should it need to wind-down …

In the ever-evolving world of car finance, staying abreast of regulatory changes is not just advisable; it’s imperative. The FCA recently underscored this necessity by publishing an update on its efforts to curb misleading adverts and financial promotions. In 2023, the FCA’s diligent oversight led to over 10,000 financial adverts and promotions being withdrawn or amended — a significant increase of 17% from the previous year. KEY REGULATORY UPDATES AND THEIR IMPLICATIONS The FCA’s increased issuance of alerts, rising to 2,285 in 2023 from 1,800 the previous year, clearly signals its commitment to protecting consumers from scams. The recent focus on illegal crypto-asset promotions underscores the expansion of the FCA’s concern, reflecting the broader changes in the financial landscape. Of particular note is the FCA’s concern regarding the rise of ‘finfluencers’—influencers promoting financial products on social media. This trend highlights the evolving financial promotion channels and the need for firms to ensure all promotions are clear, fair, and not misleading. From 7 February 2024, the requirement for authorised firms to obtain permission from the FCA before approving promotions for unregulated persons marks a significant shift. It emphasises the need for expertise and competence in the approval process, ensuring that consumers have the information to make informed financial decisions. THE CONSUMER DUTY AND ITS ROLE The Consumer Duty is a cornerstone in the FCA’s efforts to ensure that firms are genuinely acting in the best interests of consumers. It mandates that firms provide clear and comprehensive information and demonstrate that their actions help consumers make effective decisions. THE FCA’S STANCE ON MISLEADING ADS AND PROMOTIONS Lucy Castledine, Director of Consumer Investments at the FCA: “People need clear, fair and accurate information to base their financial decisions on. We will continue to intervene and take action when we identify firms not meeting our minimum standards.” As senior stakeholders at car dealerships, it’s crucial to understand that the landscape of car finance is not just changing; it is becoming more demanding regarding transparency and consumer protection. MARSH FINANCE: YOUR PARTNERS IN COMPLIANCE With over fifty years of experience in the car finance industry, we understand the challenges and opportunities presented by this evolving regulatory landscape. Our unique position as a family-owned lender allows us to offer more than just financial solutions. Our free compliance and operational consultancy service is specifically designed to support our partners in this area. We provide expert guidance to ensure that financial promotions are compliant with the latest FCA regulations.

The UK continues to grapple with economic challenges, including a cost-of-living squeeze compounded by various factors. While recent months have seen falling inflation figures, particularly in food prices, other pressures persist. Heightened energy and fuel costs, disruptions in global supply chains, and ongoing geopolitical tensions such as the war in Ukraine and the aftermath of Brexit continue to impact households across the nation. According to Citizens Advice, the combination of housing and energy expenses has pushed five million people into negative budgets, marking a 50% increase over the past four years, with an additional two million cutting back on essentials to avoid financial strain. Despite the downward trend in inflation, the high cost of necessities remains a significant concern for millions of individuals and families across the country. CHALLENGES OF THE UK LENDING LANDSCAPE In response to the cost of living, lenders confront heightened defaults and fraud, making loan approvals more stringent. Lenders have faced several challenges with collecting borrowers’ repayments due to rising living costs, including income instability, limited disposable income and the ability to service existing debt, increasing the likelihood of delinquency or default. As more individuals seek credit to cover their expenses, a growing number, particularly those already in vulnerable circumstances, encounter challenges in securing loans. Numerous lenders report an increase in rejected applications due to applicants failing to meet affordability criteria, highlighting consumer’s heightened financial burden. CHARTING A COURSE WITH THE FCA The Financial Conduct Authority (FCA) has outlined its expectations for lenders to support customers facing financial difficulties. Building upon the Tailored Support Guidelines (TSG) introduced during the Covid-19 pandemic, the FCA aims for these measures to be an enduring element of a lender or debt collector’s Consumer Duty. Lenders are asked to extend support not only to those already in arrears but also to customers at risk of payment difficulties. Key expectations include better identification and engagement with vulnerable customers, offering transparent forbearance options that consider existing indebtedness, and providing affordable and sustainable repayment plans. Additionally, lenders are encouraged to explain the benefits of debt advice and facilitate access to it for customers. Implementation of Standard Financial Statement (SFS) guidelines, along with the ability to share income and expenditure assessments with customers for use with other creditors, is emphasised as integral to supporting customers. The FCA’s Borrowers in Financial Difficulty (BiFD) project, initiated in response to the pandemic, aims to assess firms’ policies and processes following the implementation of TSG for mortgages, consumer credit, and overdrafts. The BiFD Report underscores the importance of lenders being well-equipped to support customers, particularly given the ongoing cost-of-living challenges. Firms should be proactively identifying and addressing financial difficulties, necessitating the implementation of robust systems and processes. Firms should be proactively identifying and addressing financial difficulties, necessitating the implementation of robust systems and processes. Increased customer contact and tailored forbearance options were highlighted, stressing the need for a better understanding of individual circumstances to ensure sustainable debt repayment arrangements. Furthermore, lenders are encouraged to provide signposting advice regarding money …