The impact of the new FCA Consumer Duty Policy Statement

Kay Westgarth, Head of Sales at Standard Life Home Finance 

In this issue we would like you to share your thoughts on the impact of the new FCA Consumer Duty Policy Statement (PS 22/9) and how it effects borrowers and advisers in this area of the market.

Whether you’ve worked in financial services for five, ten or fifteen years, you will be aware of the robust regulation which underpins every aspect of the advice you provide.  It shapes how we can - and indeed how we can’t – help our clients and works to ensure that at the end of the day, both parties are aware of their options and responsibilities.

Against this backdrop, you may be forgiven for taking a deep breath when you consider what the Consumer Duty means to your business.  However, when you delve into it, you are likely to find that given how well regulated the later life lending market is already, you may well be better prepared than you think.

So, what is the Consumer Duty?  These new rules and guidance which will come into effect from July 2023 aim to raise the standards of firms across the financial services sector, and to ensure customers receive the outcomes they expect from the products and services they purchase.

In order to achieve this, principle 12 has been added to the Duty and will require firms to "act to deliver good outcomes for retail clients" across all stages of the customer journey and the product lifecycle, from strategy and design, through to redemption.

This requires firms to act in good faith towards retail customers, avoid causing foreseeable harm to these customers as well as enabling and supporting them as they pursue their financial objectives. In essence, the Consumer Duty has been put in place to ensure firms deliver good outcomes for retail customers.


How will this impact borrowers?

For borrowers, this should mean improved customer service, continued product innovation which provides better financial outcomes as well as value for money and the reassurance that their financial objectives are being met through the advice they receive and the features the products have.

In real terms, this isn’t like when the affordability checks were launched to the residential market meaning customers needed ‘to prove more’ and provide additional evidence and paperwork. For the customer, there should be no real changes in terms of process from their prospective.

However, it is a bit more complex for advisers, as a large proportion of the Duty is around evidence and showing how an adviser has delivered a good outcome and proving why it is a good outcome.


Principle 12 will be unpinned by four outcome areas:

  • Governance of Products and Services
  • Price and Value
  • Consumer Understanding
  • Consumer Support
To comply with the new ruling firms must adapt their oversight and monitoring strategies to ensure they oversee, assess, test and evidence the outcomes they deliver. A lot of this will need to be evidenced based through documents such as FactFinds and KFIs, recorded phone calls/video calls files, and confirmation of thorough product sourcing.

This demonstrates that clear and factual information has been given regarding the product, as well as an awareness and understanding from the customer that they know the parameters of the financial product they are signing up for. Technology and online tools can play a key part in this as long as comprehensive client files are recorded for safe keeping.


2023 and beyond

The Consumer Duty will be enforced by the FCA from July 2023, so the sooner we as an industry embrace these regulatory changes and operate in accordance with principle 12, the sooner these amendments will become the norm. Back to newsroom

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