The UK Financial Conduct Authority’s Consumer Duty – a whole new level of regulatory oversight.

  • August 12th, 2021
  • By Paul Taylor
  • No Comments

For UK businesses involved in selling consumer credit, compliance with the Financial Conduct Authority’s regulations looks set to become much more demanding.

Based on the proposals in the recent consultation on a new “Consumer Duty”, it very clear that the FCA intends to put in place a regulatory regime that’s far more onerous than any seen before.

Financial Conduct Authority

Brokers and providers of consumer credit are going to need to completely redesign the way that they operate.

The new Consumer Duty will mean credit brokers will be responsible for a whole new set of areas including customer service and actual customer outcomes.

Products and services will need to provide “fair value” (presumably as ultimately determined by the FCA) and providers will need to ensure that they are treating customers in a way that they would wish to be treated themselves.

It won’t be enough to just provide clear and accurate information. Special consideration will need to be given and shown (by firms) for how customers (including vulnerable customers) act on the information in the real world.

In effect, the Consumer Duty places, upon regulated credit brokers, a significant “duty of care” towards consumers.

They’ll have to make sure that their products offer “fair value” and “good outcomes”.

The FCA says that firms will need to:

  • Ask themselves what outcomes consumers should be able to expect from their products and services.
  • Act to enable rather than hinder those outcomes.
  • Assess the effectiveness of their actions.

The FCA wants these requirements to even apply to firms involved in supply and manufacture of products, even if they don’t have any direct relationship with consumers.


If this is concerning to you, then you are surely not alone.

As the FCA itself states, this new set of expectations will demand a significant shift in culture and behaviour for many firms.

So, the key question is:

what are you going to need to do to comply?

Achieving and maintaining compliance is certainly going to require time, energy, and some level of investment.

The changes will become clearer as more details and timelines are announced. This will enable specific plans to be made.

However, there are things that probably makes sense to do now.


What can you do now?

Get compliant now

Assess and ensure your compliance with the FCA’s existing  consumer credit regulations.

The FCA has made it clear that it is going to take a more “hard line” approach. So, make it a high priority to ensure that you are compliant now.

Get help if you need it. There are expert advisors in this field, and we work as preferred partners with one of the leading companies, Product Partnerships.

Assessing your compliance should include careful examination of interactions with customers and potential customers, through all relevant channels. Mystery Shopping is a uniquely effective way of seeing what is really happening, in detail.

Make sure that the feedback that you get allows you to…

Assess your organisation’s culture and values

Take a thorough and honest look at your culture and values (as demonstrated in interactions with customers and potential customers).

  • Are your staff recommending the best option for the customer?
  • Does the product produce the best outcome for the customer?
  • Are staff really going a step beyond “treating customers fairly”, and actively looking out for their interests?
  • Are they treating disadvantaged or vulnerable customers in the way that you would want a vulnerable family member to be treated?

The answers for most businesses will likely be “no”, but the gaps need to be assessed. Looking at what happens in particular scenarios will help you understand those gaps, and understand what needs to change in terms of processes, behaviours, attitudes and culture.

Design your new model

Of course, this is much easier said than done, but it seems clear that the “significant shift” (referred to by the FCA) in culture and behaviour will be necessary for most firms. You will need to look at the areas outlined in the Consumer Duty proposal, and see where and how your own treatment of customers and potential customer needs to change.

If you move quickly, you may have made real progress in these areas by the time that further details and timeframes are announced.


Following design and planning, at some point, it will be time to move onto implementation, or rather, transformation.

The process of achieving and maintaining compliance is likely to be one that is ongoing as the scope and depth of regulation continue to increase. But the best time to start is now. The longer this is put off, the harder it will be to catch up, and the greater risk your business will face.

Where is this all leading?

Philosophical arguments about free markets, individual responsibilities, and the need for state power and intrusion to be limited may be valid, but they are probably best left aside here.

Unless the FCA performs a U-turn on these proposals, it seems clear that businesses involved (perhaps even indirectly) in selling consumer credit will need to operate in an environment of more “red tape” and of higher risk of penalties and punitive action (including authorisation withdrawal) for a dramatically larger number of potential infractions.

The phrase “nanny state” may no longer be adequate. The sheer administrative burden of compliance, as well as a very real duty of care towards consumers and their end outcomes, at some point, must begin to compromise firms’ profitability and ultimately, their commercial viability.

Excessive regulation can and has strangled businesses in the past, and there is a risk of this in the future.

Mystery Shopping as a key compliance tool

It seems clear that it is going to become harder to remain compliant with the FCA’s requirements. Compliance will require time and attention, and the right tools.

Mystery Shopping has long been recognised as being valuable for monitoring regulatory and legal compliance. It provides clear and detailed information about how customer enquiries and interactions are being handled in the real world.

As FCA oversight expands (to include customer service, the availability and clarity of information, and whether the best products are really being recommended, etc.) the value of Mystery Shopping for compliance purposes is only going to increase.

(To discuss a Mystery Shopping programme for your organisation, call us now on 01392 984224. Alternatively, email us on or click here to book an initial discovery call with Paul Taylor, our Managing Director.)

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