Features | 22/07/21


Thankfully we are now heading towards the end game of the Covid Epidemic fall out, as the vast majority of UK citizens will have had their two vaccinations by the end of August. At that stage the Government and business alike can take stock and evaluate the new world and whether economic and business models need tweaking, or potential wholesale change.

Within the last eighteen months we have seen massive changes to consumers buying and payment methods which will have a far reaching impact going forward. Government, consumer groups and the industry should be working together to ensure that the services and delivery are appropriate, and perfectly fit the consumers’ needs as the momentum to change gathers more speed.

The ever constant in this process of post Covid is the consumer who, despite technology, age, and information remains fallible with regard to ‘wants and needs’, especially in an environment that is bombarding potential consumers with wall-to-wall advertising twenty four hours a day. Like it or not, the United Kingdom has an economy built on consumer spending supported by the financial services sector. Enhanced affordability regulations and harsher credit scoring have increased the danger of no access to necessary regulated credit for many consumers. The incessant move to a cashless society, the changes that are occurring to credit cut-off rates, an increased APR, or reduced credit card limits will bring additional stresses and strains to the system.

There has been a debate for some time whether financial services firms should be subject to a special duty of care. This is despite the fact that financial services has had tough unrelenting regulatory changes imposed on the market.

The FCA has stated that they are under considerable pressure to introduce one. The regulator released a consultation paper in May, CP21/13 ‘A New Consumer Duty’ that would set clearer, higher standards impacting on firm’s culture and conduct.

The proposals are far reaching and require the attention of Directors and Senior Managers during the current consultation round, and after implementation. The proposals reflect the approach that the FCA has increasingly taken in enforcing its powers recently, building on Treating Customers Fairly (TCF), which all CCTA members will be very familiar with. Company culture is a subject that exercises the minds of boards across the world, both large and small, as the common rhetoric is that what is measurable is manageable.

The CCTA will be responding to the consultation paper and especially in regards to how the FCA plans on measuring culture across such a broad span of companies, and specifically for the proposed measurement processes.

The FCA has said the Consumer Duty would not remove consumer responsibility for any decision-making or prevent consumers making decisions not in their best interests or apply retrospectively to past business. We will be asking for clarification from the FCA on what exactly this means.

As all members will be aware, the CCTA has been a leader in the Access to Responsible Credit campaign. We want to ensure consumers are not blocked by default from accessing credit through harsh but well-meaning regulation, which has become a barrier rather than an assistance. The alternative lending sector in particular has been damaged, leaving consumers with poorer credit scores and nowhere to borrow from an FCA regulated lender, resulting in borrowing from family or illegal lenders.

The CCTA supports proposals that help ensure needs are given priority. It is right that firms are expected to put themselves in the shoes of the customer, but it is also right that the consumer should be fair and honest with the lender. The proposals will represent a significant change in how the FCA expects firms to operate.

It is not clear that the FCA has the skills and experience necessary to supervise firms on this basis and enforce the proposed Consumer Duty. There is a risk that the proposed new Consumer Duty will become a catch-all for complaints, with the FOS able to uphold any and all complaints as a result. If so, the new Consumer Duty is likely to become a fertile hunting ground for CMC’s.

The consultation is open for comment until 31 July 2021. The FCA expects to consult again on proposed changes by the end of 2021 and make any new rules by the end of July 2022. We welcome any feedback or comment from members on the new Consumer Duty.

Greg Stevens