Written by Chris Little, Chief Revenue Officer, finova
With July 31st marking the one-year anniversary of the Consumer Duty for open products and the beginning of its regulations for closed products, assessing its impact is essential. This past year has introduced key changes, including enhanced transparency, clearer communication, and fairer treatment for customers.
As closed products now come under these regulations, consumers can expect similar improvements. However, recent research from Smart Money People shows that 84% of consumers have not seen any improvement in their treatment by financial providers since the FCA implemented these regulations.
These findings highlight a gap between the promises of the Consumer Duty regulations and consumers’ actual experiences, offering an opportunity to evaluate how lenders have performed and identify areas for improvement.
Progress a year on
Over the past year, the industry has made impressive strides in implementing particular aspects of the FCA Consumer Duty regulations. Lenders have improved in product governance, designing and distributing products that truly meet customer needs. Communication has also improved, with simplified terms and increased transparency. Some firms have even adjusted their fee structures for fairer customer value.
Across the board, there’s been a cultural shift towards customer-centric policies. Historically, brokers might have overlooked certain financial products, but the broadened scope under Consumer Duty has changed that. This isn’t just about compliance; it’s a genuine commitment to better serve customers.
This comprehensive approach meets regulatory expectations and enhances brokers’ value proposition. They can now offer more holistic and valuable guidance, better serving their clients.
Support for vulnerable customers
Supporting vulnerable customers is a central aim of the Consumer Duty, prompting mortgage lenders to enhance communication and accessibility. Many have introduced a ‘jargon buster’ library, redesigned websites for greater clarity, and added new contact options like email and outbound calls. These initiatives help customers grasp product details and navigate their choices more effectively.
Alongside communication improvements, firms are redesigning customer journeys to highlight fees and charges upfront, preventing any surprises. Brokers have been trained to provide specialised support for vulnerable customers, and proactive data use helps firms identify those who aren’t fully benefiting from their products. This allows brokers to offer better options and ensure informed decisions.
Lenders have also developed systems to capture and monitor vulnerabilities more effectively. By removing productivity targets for customer service staff handling vulnerable cases, there’s a greater focus on providing personalised, empathetic support, ensuring that these customers’ needs are met with dedicated care and attention.
Areas for improvement
Even with these changes, several areas require further improvement. Many firms have not fully embedded Consumer Duty principles into their governance structures, often placing these responsibilities solely on compliance teams without adequate board-level involvement. The effective use of data to monitor and evaluate customer outcomes is another challenge, highlighting the need for more comprehensive data strategies.
Other pressing issues include gaps in data for closed products and ensuring fair value and customer engagement for legacy products. Firms must assess the impact of vested rights and ensure that terms and conditions do not result in poor consumer outcomes. This means continually reviewing and updating policies to meet current customer needs and regulatory standards.
Leveraging technology for support
Adopting technology in mortgage lending can address the issues of the past year. Real-time insights from advanced data analytics can keep all key decision-makers engaged and informed, ensuring that Consumer Duty principles are fully embedded in the firm’s governance structure.
Predictive analytics and machine learning tools can help firms overcome difficulties in monitoring customer outcomes by analysing customer behaviour to identify trends and issues early. This proactive strategy ensures consistent monitoring and evaluation, meeting Consumer Duty requirements.
Technology can also play a role in greater collaboration at key touchpoints for customers, including brokers, lenders, and conveyancers. For example, broker ID tools can perform comprehensive digital checks, ensuring swift broker verification and selection, which improves compliance and customer service.
Although there have been notable strides in communication and product design, many firms still encounter challenges in harnessing data effectively. Utilising API-integrated services simplifies this by allowing brokers to access and quote multiple products through a single platform, ensuring a smooth, comprehensive service tailored to customer requirements with minimal extra effort
Reflecting on a year of progress, it’s clear that while significant gains have been made in supporting vulnerable mortgage customers, gaps still exist. Embracing the latest technology will be key to updating legacy systems and ensuring services are always available to those who need them most. To truly make a difference, this technological evolution must be prioritised.
