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Despite what some might think, the incoming Consumer Duty regulations won’t only apply to financial advisers.
With the recent issuing of its ‘Dear CEO’ letters, it’s clear that not only is the FCA actively looking to ensure Consumer Duty initiatives are underway, but also that its focus is shifting to consumer finance.
There’s growing pressure from the regulator for any retail consumer creditor offering a finance plan - from an independent furniture company selling a sofa to a plumber installing a new central heating system, or even someone buying a new pair of glasses - to ensure they can identify each and every instance of vulnerability and ensure ‘good outcomes’ for the customer.
Whether the purchase on credit is big or small, lenders and brokers must find ways to implement processes for the identification of vulnerability and to provide appropriate support for those who are at risk, if they hope to meet the requirements of Consumer Duty.
The impact of this on the UK consumer finance market is huge. Take the motor finance market, for example, the rate at which cars are being bought on finance shows no sign of slowing, with the average sum borrowed in the UK for a new vehicle shooting up from £11,964 to £25,039 in the space of just 13 years.
With such large amounts being spent, and with the cost-of-living crisis putting household budgets under significant pressure, it’s imperative that potential customers are accurately assessed for any risk of vulnerability before they’re offered a finance arrangement.
For a trained clinician, this is something which could be done manually, but for sales professionals who lack an in-depth knowledge of the complex nature of vulnerability, identifying at-risk customers will prove an incredibly difficult task without technological support.
Vulnerability could stem from illness, divorce or low resilience – triggers that have all been defined by the FCA – as well as from a threat to someone’s income or their suitability for credit. It’s the emotional, mental and cognitive response to these circumstances that leaves someone vulnerable, and as such, they must all be correctly identified.
And with potential sanctions in store for those firms not complying with the regulations, there is increasing pressure on consumer creditors to protect their business interests.
To address this, Comentis have combined clinical and technical expertise to launch a digital ‘Duty of Care Assessment’ to identify vulnerable customers and provide tips and advice on how best to support them as they go through the finance process.
Building on the experience gained within the wealth and mortgage markets, our new assessment takes into account the very different customer journey that exists in the world of consumer finance. The assessment is quick and easy, with minimal impact to the customer online or retail journey and provides lenders and brokers with the reassurance that they can consistently and objectively identify and support their vulnerable customers, and thereby comply with Consumer Duty regulations.
For more information, please visit our Financial Vulnerability Assessment page or contact us at enquiries@comentis.co.uk.