Fail to prepare… prepare to fail
FCA review of historical DCAs

Published 15 April 2024

In January 2021, the FCA banned discretionary commission arrangements (DCAs), removing the incentive for brokers to charge customers a higher interest rate for their motor finance. A continued rise in the number of complaints from customers about DCAs in place prior to the ban and the recent decisions by the Financial Ombudsman Service (FOS) which found in favour of complainants has highlighted concerns for the sector. Anticipating a significant increase in complaints to firms and the FOS, the FCA intervened in January 2024, appointing a skilled person to review historical sales of motor finance agreements across several firms involving DCAs. The FCA aims to communicate a decision on next steps by the end of September 2024, and whilst the review remains ongoing, it is likely firms will continue to receive an increased level of complaints. Similarly, the high-cost short-term credit sector (HCSTC) experienced challenges associated with a rise in complaints relating to historical unaffordable lending practices which led to several firms exiting the market or undertaking a formal restructuring procedure to deal with redress liabilities. Whilst firms contemplate what, if any, impact the review and increased complaints will have on their business, there are several useful takeaways from the HCSTC sector which highlight matters firms should be considering. FINANCIAL AND OPERATIONAL RESILIENCE Financial and operational resilience is key. Firms should be conducting detailed scenario analysis, with cash flow and liquidity modelling, in a range of severe but plausible scenarios enabling management to understand what the business can withstand, both financially and operationally. This will provide greater visibility of areas of potential stress or vulnerability within the business and clarity on triggers that may lead to underperformance, such as a sudden increase in compensation levels or operational costs related to assessing complaints. WIND-DOWN PLAN Firms should ensure they have a well-documented wind-down plan which considers the extent to which the firm may be affected by historical DCAs, including how a remediation exercise and associated liabilities may impact the operational and financial performance of the business. A robust and deliverable wind-down plan can act as a tool to build stakeholder confidence at a time of uncertainty. It can also assist management and advisers in developing contingency plans in a more efficient and cost-effective manner. REMEDIATION EXERCISE Should a firm need to undertake a remediation exercise, consideration will need to be given to these key elements. Whilst not an exhaustive list, it gives some indication as to how complex and expansive a remediation exercise can be: Governance framework This is vital to aid decision making and co-ordinate a successful remediation exercise. What will the MI reporting suite look like and how timely will it be? How will appropriate oversight be given to any outsourced processes? Population identification What steps have been taken to identify the population impacted and its various cohorts? Are there any gaps in data or dependency on legacy systems? Have historical debt sales included impacted consumers? Are there contractual claw-back provisions that need to be considered? Review methodology Does the …

FOS Annual Plans and Budget published

Published 08 April 2024

Last week, the Financial Ombudsman Service (FOS) published its final Plans and Budget for the forthcoming financial year, following a consultation that closed in January. This process takes place annually and allows for firms to feedback on plans the Ombudsman around the complaints process, and how the FOS intends to improve it. This year the FOS consulted on plans to lower fees and operational improvements. It also asked about plans to move forward with charging professional representatives, including claims management companies (CMCs), to access the Ombudsman service. Firstly, there was good news in that the FOS has decided to move forward with lowering the case fee to £650, a drop of £100 per case. They have also confirmed reductions in the compulsory and voluntary jurisdiction levy costs. This is something the CCTA has campaigned on in recent years, so it is good to see a step in the right direction around reducing the regulatory burden placed on firms. We have long argued that that is has been particularly intense for small and medium sized firms, and those that have been affected by the activities of claims management companies. It is disappointing then that the Plan doesn’t cover feedback about plans to charge professional representatives including CMCs, to access the Ombudsman service. The CCTA and several members responded to the original consultation outlining their support to move forward with charging. The FOS will now be publishing a further consultation on charging professional representatives which will outline the feedback they received and discuss next steps during the first quarter of the 2024/25 financial year. It is troubling that these plans have not moved further forward. The status quo means that there are incentives to submit complaints, regardless of the quality. We have all seen that upload rates for complaints brought by CMCs are much lower than when raised directly by the customer. So, consumers are affected by this delay also. We have written to the FOS CEO to outline our concerns around the progress of charging professional representatives. There is a danger that CMCs continue to exploit the system while the process rolls on. Especially when the expected consultation might propose a deadline for charging, or a new system which sees CMCs barrage lenders ahead of implementation. For too long these firms have been able to submit claims of poor quality, because win or lose the lender will have to pay the case fee. The reduction is in the case fee is welcome but still represents a fee of £650. This remains a huge burden on lenders. Consumers also continue to suffer as claims brought on their behalf by these firms are often not substantiated. It is time to take action to improve a system that is meant to assist those that have been treated unfairly.

The burning questions
How identify and handle fraudulent bank statements

Published 08 April 2024

Historically, the automotive finance sector was anchored in face-to-face transactions and physical verifications. However, as digital transitions became more prevalent, the door for cyber fraud and manipulation inadvertently opened wider. The evolution of digital tools has made falsification more sophisticated, with the latest battle surrounding fraudulent bank statement submissions during car finance applications. RISING FRAUD CASES ON CAR FINANCE APPLICATIONS Over the last few years, Marsh Finance has noted a worrying upswing in fraudulent activities, specifically concerning bank statements in car finance applications. The integrity of financial documentation has always been paramount, but with fraudulent cases on the rise, the industry must be more vigilant than ever. IS THE RISING COST OF LIVING TO BLAME FOR THIS RISE IN FRAUDULENT ACTIVITY? Several factors might be driving this surge in fraudulent activity. A significant one is the rising cost of living. As living expenses outpace wage growth, some individuals feel pressured to misrepresent their financial position to secure vehicle finance. While this is no excuse for fraud, understanding the underlying motives can help formulate strategies to address the root cause. COMMON FRAUD TRENDS: DOCTORED BANK STATEMENTS Many of these fraudulent cases involve doctored bank statements. Whether through sophisticated digital manipulations or rudimentary paper alterations, applicants are presenting false records to enhance their financial standing. Such manipulations may range from inflating balances, removing evidence of financial hardship, or even entirely fabricated statements. SPOTTING A FRAUDULENT BANK STATEMENT Inconsistent formatting: Mismatched fonts, varying font sizes, or irregular spacing. Rounded figures: Real bank statements often show exact amounts, not rounded numbers. Missing transactions: Suspicious gaps in transaction history. Logos and branding: An outdated or pixelated bank logo may hint at tampering. Emerging technologies, such as AI-driven document verification systems, can play a pivotal role in detecting discrepancies in bank statements. By leveraging pattern recognition, anomaly detection, and machine learning, businesses can quickly identify and flag suspicious documents for review. REPORTING CAR FINANCE APPLICATION FRAUD TO CIFAS CIFAS (Credit Industry Fraud Avoidance System) is a not-for-profit organisation that aims to reduce financial crime. If you suspect fraudulent activity: gather all evidence related to the suspected fraud report the matter directly to CIFAS through their official channels notify the relevant law enforcement agencies. Motor finance CCTA members play a pivotal role in creating a safer automotive finance ecosystem by reporting these incidents. OPEN BANKING: THE FUTURE OF SECURE ASSESSMENTS Open Banking offers a more transparent, direct, and safer alternative to reviewing bank statements. By allowing regulated businesses to access financial data directly from banks (with the customer’s consent), the chances of encountering fraudulent statements drop dramatically. Get a clearer view of an applicant’s finances whilst streamlining the application process.

Will Big Tech restrict competition?
Alph L&C give their opinion

Published 08 April 2024

In October 2022, the FCA launched their Discussion Paper assessing the potential competition impacts of Big Tech entry and expansion in retail financial services (DP 22/5). Various views were invited from stakeholders, culminating in a Call for Input ending in January 2024. Essentially, this call for input wanted to focus on the competition impacts that may arise from Big Tech firms’ data advantages potentially combining with customer financial data sources. Over the past few years, technology has advanced to such an extent that we can now run our lives through our mobile phones, from online banking to downloading the comparison site apps to find the best insurance deal. In the FCA’s Call for Input in November 2023, Chapter 4 looked at potential competition impacts they wanted to explore. The FCA gave an example in that Big Tech firms with access to browsing data may be aware of the financial products that someone is searching for – particularly if they have this information in real time. They may understand an individual’s financial needs better through their users’ activity on social media and e-commerce platforms. As a result, Big Tech firms may be able to engage in sophisticated re-targeting using display and search advertising. Consumer Duty asks firms to look at their communications with customers. Challenges to this can be Google and the character requirements within GoogleAds. Would there still be a level playing field if Big Tech could use sophisticated methods? Apps allow customers to manage their account and potentially interact with you on the go. In an ideal world, lenders may want to allow loan applications through an app, but does current tech allow this? Short term lenders live with the FCA’s Price Cap on Credit but are you aware that if you have a product that offers personal loans through the Apple app then they limit you to a maximum APR of 36% (including costs and fees) with a repay in full date of over 60 days? Who made them a regulator? The FCA suggest that Big Tech capabilities may assist with creditworthiness decisions by having an algorithm that analyses purchase history from their e-commerce platform against consumer behaviours and therefore the likelihood of repaying loans. They recognise concern that firms may not be able to compete on acquisition and retainment, that Big Tech could price discriminate and stifle financial services innovation. The Digital Markets, Competition and Consumers Bill should be enacted this year and Competition Law will be updated, including the CMA’s new powers to fine businesses akin to the ICOs based on turnover. Will this be a chance to be tough on Big Tech?

A nurturing atmosphere
COEO UK empowers staff with wellbeing workshop programme

Published 08 April 2024

In a bid to fortify its internal wellbeing framework, coeo UK has launched its highly anticipated 2024 staff wellbeing workshop programme. This initiative aims to build upon the notable successes achieved in the past twelve months, underscoring the company’s commitment to prioritising employee welfare and fostering a supportive workplace culture. Teaming up with former international rugby player turned mental health presenter, Robbie Hunter-Paul, coeo UK kicked off the programme with the inaugural workshop titled ‘An Introduction to Wellbeing’. This session marks the beginning of an empowering journey for staff members as they embark on constructing their own wellbeing toolkit. Speaking on the significance of the initiative, coeo UK CEO Tim Anson emphasised the paramount importance of prioritising employee wellbeing, particularly in an industry characterised by demanding interactions and emotionally taxing situations. Anson highlighted the essential role of supporting the mental and emotional health of employees in maintaining morale, enhancing productivity, and cultivating an empathetic organisational culture. The workshop programme encompasses five comprehensive sessions covering four core pillars of wellbeing, with a dedicated focus on stress management. Hunter-Paul provided insights into the workshop sessions, detailing how they address various aspects of wellbeing. From reframing perceptions around mental health to exploring stress management techniques, mindfulness practices, the importance of quality sleep, and the role of exercise and nutrition, the programme offers a holistic approach to promoting staff wellbeing. Hunter-Paul further emphasised the programme’s broader impact, noting that it is part of a series of staff wellbeing activities being delivered by coeo UK. Leveraging a partnership with Health Assured, the programme provides staff with access to detailed information and professional support, ensuring comprehensive coverage of all wellbeing areas addressed in the workshops. Additionally, a portion of the programme will be delivered off-site, enabling broader participation and engagement among staff member groups or sports teams. Anson reiterated the transformative potential of investing in wellbeing initiatives, citing their positive impact on productivity, customer engagement, and overall success. He underscored the ethical importance of prioritising employee welfare, particularly in an environment marked by increasing regulation and scrutiny. With the launch of its comprehensive staff wellbeing programme, coeo UK sets a new standard in fostering a healthy and supportive workplace culture, reaffirming its commitment to empowering its workforce.

Back to the drawing board?
Embracing change in a Consumer Duty focussed industry

Published 08 April 2024

In recent weeks, the FCA joined forces with UK Regulators Network (UKRN) issuing statements around debt collection activity. This ‘activity’ relates to all forms of communication to customers in arrears, be it from lenders, creditors or their chosen third party outsourcers. At a time when the cost of living crisis is biting hard, this is likely to go hand in hand with the ongoing campaign spearheaded by Martin Lewis, in relation to placing a cap on the number of communications allowed to be sent to a customer in any given week, including reminders and regulatory notices. This is a rule already in place in other countries. Imagine yourself as a customer with multiple debts, being contacted by multiple creditors, multiple times a week and it’s easy to see why this has been raised, and indeed where it’s heading. In essence what this means, under the umbrella of the Consumer Duty, is that messaging to customers must be fair, transparent and not misleading. This practice, when undertaken in the correct manner and within the spirit of Consumer Duty can actually enable a company to control costs, whilst improving the overall customer journey. It’s about reviewing every single communication and making sure it offers assistance along the way, encouraging customers to engage. Seven years ago, the FCA focused on the business I had joined to understand the market better, and imposed this similar rule. I can recall feeling how unfair that was when competitors were continuing under the old regime. I make it sound simple. It wasn’t. It was painstaking and an absolute commitment was required, however we were repaid ten fold. However, having agreed to abide by the requirement, we found over time that our bottom line improved alongside increasing our brand and reputation. I make it sound simple. It wasn’t. It was painstaking and absolute commitment was required, however we were repaid tenfold. Changing our CRM system was possibly the biggest and toughest part of the process, as we had to create a Single Customer View to ensure we complied with the new requirement, but looking back it was by far the best move we made. We also reviewed all our processes and communications and adapted them to fit our new system. Following that, we asked our partners to do the same. Anything is possible, but it takes commitment to undertake a thorough review and execute a plan to achieve a great outcome. I cannot stress enough how starting with a review of your systems is key to getting this right. To review your operation effectively to allow this (expected) change to work, it’s wise to look to your Consumer Duty Champion (independent of shareholders and management) who Is experienced and well versed on looking at this subjectively, as this will assist the business in become a shining star, raising brand, profits and ensuring customer delight.

DIGITAL LENDING
REVOLUTIONISING FINANCIAL ACCESS AND EFFICIENCY

ARYZA

Published 08 April 2024

In the dynamic landscape of lending, the fusion of technology and financial services is reshaping traditional practices, ushering in an era of digital lending. Historically, the lending sector in the UK has been dominated by traditional financial institutions, however, with the advent of advanced technologies, the industry is experiencing a profound transformation. Today, lending encompasses various categories and forms, ranging from mortgages to personal loans, each catering to diverse borrowing needs and preferences. Amidst this diversity, the shift towards digitalisation and automation is gaining momentum. Financial service providers are actively embracing automated models, propelled by the increasing prevalence of digital interactions, particularly accelerated by the COVID-19 pandemic. The magnitude of outstanding loans underscores the critical role of lending in supporting individuals amidst financial challenges. As borrowers navigate the borrowing cycle, the need for efficient and accessible support becomes more pronounced. Digital lending emerges as a response to these evolving needs, offering a progressive and adaptable framework that aligns with the demands of the digital age. By leveraging technology, digital lending addresses longstanding challenges encountered in traditional lending models. Digital lending is not a trend but a transformative force reshaping the financial landscape. One of the primary advantages of digital lending is its ability to enhance the customer experience. Through apps and online platforms, borrowers can seamlessly access credit facilities from any location, streamlining the application process. Digital lending facilitates quality decision-making by leveraging data analytics to gain insights into individual customers, enabling lenders to make informed decisions regarding credit approvals, income verifications, credit scoring, and loan outcomes. Cost efficiency and effective time management are additional benefits. By integrating digital solutions into their processes, lending companies can optimise operational costs and reduce processing times, thereby enhancing overall efficiency. However, the transition to digital lending also introduces certain risks, particularly in areas such as payments, IT infrastructure, and regulatory compliance. It is imperative for lenders to implement robust risk management strategies to mitigate these risks and ensure the security and integrity of the digital lending ecosystem. The rise of fintech lending is catalysing innovation within the industry. Fintech companies are revolutionising lending processes through the provision of cloud-based software solutions and leveraging technologies such as AI and data analytics to enhance efficiency and security. Digital lending is not a trend but a transformative force reshaping the financial landscape, offering unprecedented opportunities for financial access and efficiency. As we navigate this digital era, embracing innovative solutions and robust risk management strategies will be crucial for ensuring sustainable growth and resilience in lending practices. By championing technology, the industry is poised to meet the evolving needs of borrowers while navigating the complexities of the digital age.

Navigating financial difficulty
A comprehensive guide to customer support strategies

Published 08 April 2024

In the face of escalating living costs, it’s imperative for firms to extend support to customers grappling with financial challenges. The Financial Conduct Authority (FCA) has been proactive in implementing interventions post-pandemic to strengthen frameworks for customer support, aligning with Consumer Duty. Our white paper delves into these dynamics, aiming to aid firms in navigating the complexities of customer collections effectively. ECONOMIC LANDSCAPE The economic terrain post-pandemic has been characterised by soaring inflation rates and escalating domestic expenses. With the Bank of England’s consecutive base rate hikes, reaching 5.25% by November 2023, the affordability of goods and services has diminished, amplifying financial strains for many borrowers. Notably, the FCA’s 2023 Financial Lives Survey revealed a significant surge in missed bill payments, underlining the pressing need for robust customer support mechanisms. REGULATORY EXPECTATIONS In this economic climate, the FCA emphasises fair treatment of borrowers and proactive engagement to resolve payment issues. The implementation of the Consumer Duty underscores the necessity for firms to prioritise customer outcomes throughout the arrears and forbearance journey. However, FCA research indicates that only a fraction of borrowers in financial difficulty receive adequate support, highlighting the gap between regulatory expectations and industry practices. COLLECTIONS BEST PRACTICE & ACTIONABLE INSIGHTS In a recent white paper on Borrowers in Financial Difficulty (BiFD) that Square 4 Partners published, we outline twelve principles encapsulating collections best practices. From proactive customer engagement to transparent fee structures, these principles serve as a roadmap for firms to ensure fair treatment and sustainable solutions for customers in financial distress. Emphasising early intervention, tailored forbearance, and effective staff training, these principles align with regulatory requirements and industry standards. In the face of escalating living costs, it’s imperative for firms to extend support to customers grappling with financial challenges. As firms gear up to tackle the impending “collections iceberg,” proactive measures are paramount. We advocate for strategic initiatives encompassing education, impact assessment, governance enhancement, resource allocation, and talent acquisition. By aligning collections strategies with regulatory mandates and economic forecasts, firms can navigate the challenges ahead and mitigate potential risks effectively. CONCLUSION In a landscape stained by economic uncertainty and regulatory scrutiny, proactive customer support is non-negotiable. By embracing regulatory expectations and implementing robust strategies, firms can safeguard customer interests and foster financial resilience in turbulent times. To dive deeper into this topic, visit our website and download our Borrowers in Financial Difficulty white paper. Our comprehensive paper serves as a guide for firms, offering actionable insights, customer support strategies and best practices to navigate the complexities of collections effectively.

A worthwhile puzzle
Deciphering consumer vulnerability in lending

Published 08 April 2024

As we continue to navigate the cost of living crisis, credit markets are seeing an ever growing number of vulnerable consumers. This is against a backdrop of the FCA’s Consumer Duty obligations, ensuring good and fair consumer outcomes. As an industry, we recognise that addressing consumer vulnerability is more than a regulatory requirement, it’s crucial for the health of both the credit market and consumers. Industry responses need to be about more than just compliance. We must build a financial ecosystem that is accessible, equitable, and resilient – ensuring all consumers, especially the vulnerable, get the care and protection they deserve. This underscores a collective industry effort to foster a fairer, more inclusive credit market. At TransUnion we’ve worked with industry to optimise our rich credit data to understand the scale and spectrum of consumer vulnerability, to help the industry identify consumers who need most support. Our immediate insights focused on the financial side of a consumer’s life, specifically understanding the impact of pressure and stress on disposable incomes. Recently, TransUnion have worked with non-financial vulnerability data via the Vulnerability Registration Service (VRS), who capture an array of self-declared non-financial vulnerabilities such as mental health, disability and gambling addiction. Using VRS data, we get an idea of challenges facing the UK industry. Vulnerability is a broad concept – a significant proportion of the population are impacted in some way and classed as vulnerable at some point in their lives. However, not all vulnerabilities lead to harm, the support the consumer needs could be based around service and accessibility rather than intervention. It’s therefore important to understand the consumer’s position on the spectrum of vulnerability, the likelihood of future harm and the best treatment strategies and appropriate services for them. For example, roughly 16m UK consumers live with some form of disability – for many their greatest need is appropriate access to credit, and efforts to ensure their inclusion (i).  When focussing solely on financial vulnerabilities, 31% of UK consumers have at least one indicator, or to be more specific, 11% of UK adults are experiencing financial distress (ii). We must build a financial ecosystem that is accessible, equitable, and resilient – ensuring all consumers, especially the vulnerable, get the care and protection they deserve. TransUnion can also identify income-based vulnerabilities, with 15m working age consumers falling into the low income bracket (where income is approximately 70% of UK median income). Whilst low income doesn’t always indicate vulnerability, the cost of living crisis has resulted in material stresses on customer’s affordability. We’ve found that approximately 10m UK consumers are in severe income distress, spending everything they earn each month (iii). We have observed good practices across the industry – examples include increased access and usage of non-financial vulnerability data; greater focus on predictive analytics, expanding outcome definitions beyond delinquency and profitability; and re-designing servicing capabilities with specific vulnerabilities in mind. Supporting vulnerable consumers is a non-competitive industry imperative, and as such, we need to collaborate and share best practices – to …

Blue sky thinking
The latest innovations in recurring payments for collections

Published 08 April 2024

In the collection landscape, innovative solutions are continually reshaping the way payments are processed and managed. With the emergence of technologies like Apple Pay Recurring, Open Banking payments, and Direct Debit, Debt Collection Agencies and lenders are streamlining processes and enhancing user experiences like never before. APPLE PAY RECURRING Apple Pay Recurring is just one of the ways borrowers are managing their recurring payments. Leveraging the convenience and security of Apple’s ecosystem, customers can use Apple Pay Recurring through gateways such as Acquired.com. Customers sign up for a subscription using Apple Pay and have the recurring payment collected as a normal Continuous Payment Authority (CPA). Apple Pay’s built-in layers of authentication allow transactions to meet all Strong Customer Authentification requirements, as well as offer a frictionless payment experience for borrowers. OPEN BANKING Open Banking payments are another rapidly growing innovation for the collections landscape. Introducing the option to pay via Open Banking from a different bank account than the one linked to their CPA or Direct Debit allows borrowers to make loan repayments from an account of their choice, enabling them to manage their cash flow more effectively. With Open Banking, debt collection becomes more transparent and efficient, benefiting consumers and collectors. These latest innovations in recurring payments are reshaping debt collection and lending practices, offering enhanced convenience, security, and efficiency. DIRECT DEBIT Direct Debit remains a cornerstone in recurring payments, offering reliability and convenience. With Direct Debit, consumers authorise payments to be withdrawn directly from their bank accounts on specified dates, eliminating the need for manual intervention. This automation reduces the risk of missed payments and late fees, providing peace of mind for both borrowers and collectors. Additionally, Direct Debit offers flexibility, allowing consumers to adjust payment schedules as needed, further enhancing convenience. NETWORK TOKENISATION Acquired.com has seen a notable improvement in success rates of recurring payments with the implementation of Network Tokens, with some customers seeing up to a 4% uplift in success rates (Source: The Acquired.com Hub). If a customer’s card is lost, stolen, or expires, Network Tokens remain usable and update with the new card details in real-time. For lenders processing recurring payments, it means enhanced security, better conversion, and the potential for reduced costs. In the UK, these latest innovations in recurring payments are reshaping debt collection and lending practices, offering enhanced convenience, security, and efficiency. With solutions like Apple Pay Recurring, the option of Open Banking payments, and legacy solutions like Direct Debit, the collections industry is better equipped to navigate the complexities of payment processing, while providing a seamless experience for consumers.

Horizon scanning
The latest regulatory issues affecting our industry

Published 05 April 2024

The industry has become increasingly busy with a range of regulatory issues, which I will touch upon later in this article. To begin with though, I would should start by thanking our members for their continued support. MEMBERSHIP RENEWALS Many firms renew their CCTA membership in January. Indeed, about 35% of our fees are due at the start of the year. So, I was delighted when our renewal rate hit 98%. It has been difficult for smaller lenders, and we have seen more leave than join the market in specific sectors. That makes our retention rate even more of a success. CCTA ACADEMY I am delighted to inform readers that our online learning and development platform, CCTA Academy, has been well-received since it’s launch at the end of last year. The FCA has clarified the importance of your team members having a certain level of understanding. CCTA Academy includes those introductory modules and provides that basic information via a range of courses. We are heading towards 300 enrolments across a range of member firms. Keep an eye on our member communications for more learning and development opportunities from the CCTA ACCESS TO CREDIT CAMPAIGN Let’s move back to policy and campaigns. Anyone who has heard me talk about the CCTA knows that we have a history linked with access to credit. Lenders and retailers came together over a hundred years ago because the banks didn’t provide credit to these communities. Increasingly, I am discussing the need for credit and what we have seen in the reduced supply for specific communities. You may have seen the Clear Score report on the non-prime market. This comes on the back of research from Fair4All Finance and more media interest. Anyone who has heard me talk about the CCTA knows that we have a history linked with access to credit. The CCTA team is looking at how to keep the discussion going and float ideas. We are always open to advice and ideas about how the regulator can help. CONSUMER DUTY On to the Consumer Duty. The Duty continues to be the issue in just about every discussion. There is a reason why the panel sessions at our events have been about the Consumer Duty for the last couple of years. Increasingly, we hear informal comments from the FCA about their concern that firms are still not doing enough about the Duty. While we have had some contact from firms seeking help with the Duty, it is less than we expected. That is partly why we are working on two guidance documents. The first will cover implementation and expectations shared by the FCA. The second will look at the requirements around the anniversary of implementation, such as the board report and closed book review. Look out for these via our member emails. CAR  FINANCE COMMISSIONS Many of you will have seen the attention that Martin Lewis has brought to the issue of car finance commissions. We are already at a point where over a …

Vulnerability must remain a central focus

Published 26 March 2024

We have written a few posts in recent months exploring the cost-of-living crisis, and the impact it is having on different consumers. Money worries continue to get a lot of coverage in the media, but we are also told about the recovering economic health of the country. It is difficult to assess how individuals are coping as it is dependent on their own unique circumstances. That said many are still struggling or could easily be affected by an unexpected shock to their income. Though financial difficulty is not the same as vulnerability, the two are inextricably linked, especially in the eyes of the regulator. The FCA has the issue of vulnerability firmly in its sights and it wants to ensure regulated firms are doing the same. Of course, someone could be considered vulnerable for nothing to do with their financial situation – they may have a disability or have suffered a significant life event. Firms should know they need to consider all possible angles. Only last week the regulator announced a review of firms’ treatment of customers in vulnerable circumstances. In its 2022 Financial Lives Survey, the FCA found that over 27M adults in the UK showed at least one characteristic of vulnerability. That is a significant proportion of the population. It is easy to see why the regulator is maintaining such a focus on vulnerable customers. The FCA’s review will look at firms’ understanding of consumer needs, the skills and capability of staff, product and service design, communications, and customer service, and whether these support the fair treatment of customers in vulnerable circumstances. It will also look at the outcomes consumers in vulnerable circumstances receive and whether they’re as good as the outcomes of other consumers.  As part of the review, the FCA will conduct consumer research as well as gathering information from firms and consumer representatives to make this assessment. Firms can be expected to be contacted and be asked to evidence their policies and procedures. This week a “Dear CEO letter” was also issued by the FCA to much of the consumer credit sector further underlining the need to consider vulnerable customers. The letter covered the entire lending cycle but urged lenders to lend responsibly and sustainably. They pointed to the fact the vulnerability is increasing while financial resilience decreases. With that in mind firms should ensure they are following the regulator’s guidance on fair treatment of vulnerable consumers. The introduction of the Consumer Duty should also help firms assess how they are dealing with vulnerable customers. It is about being proactive, stepping in when you can to help and support the customer. “Doing the right thing” for the customer might sound cheesy but a lot of this is common sense. Are you treating the customer like you would want your family to be treated? Are staff alert to the signs of vulnerability? Do you have systems in place to support customers that need it? These are the sort of questions firms should be asking themselves and …