In July 2023, the FCA’s Consumer Duty rules came into force.
Consumer Duty has been described as the ‘biggest overhaul for the UK’s financial services industry in 20 years’. But what actually changed and what have we learned a year on?
The FCA introduced ‘The Four Outcomes’:
- the governance of products and services
- price and value
- consumer understanding, and
- consumer support
These four outcomes represent key elements of the firm-consumer relationship and were the main areas that we were required to review within our own processes.
If you would like to read more about the FCA Consumer Duty rules, you can read it HERE
Taking into account the requirements of the FCA, we then began the difficult task of ensuring that everything we do as a network met these new requirements.
Following a review of all our policies, processes and customer communications, we made many changes to how we operate, ensuring the customer was at the heart of each decision.
Some of the main changes we made were:
- Introduction of Connect’s Fee Policy, that set out what we believe to be fair charges for customers to receive for each product type.
- We updated all our policies to ensure they were compliant with the new rules.
- Updated our Terms of Business.
- Updates to OMS to strengthen our Vulnerable Customer process.
- Enhanced our protection process to ensure all our customers receive an appropriate conversation.
- Created a suite of reports to monitor customer outcomes.
So, how has the industry changed one year after Consumer Duty?
Whilst lenders were already monitoring broker fees, this year we have seen more pushback to Networks and brokers where they see fees to be excessive and above what they deem to be appropriate.
Some lenders were already sending reports of cases where a fee is being charged above 1% and asking for our justification, we have now seen lenders set fixed limits on what they will accept. This represents a massive change in the Lender, Broker relationship and something we must work closely together on to ensure that there is no customer detriment. Worst case scenario could be that brokers avoid using certain lenders due to the fee limits they have, this is something we must look to avoid to prevent foreseeable harm to customers.
What can brokers do to remain compliant with the rules?
- The treatment of vulnerable customers was a big part of consumer duty, and we must ensure that customers are not disadvantaged by our processes or communication. Therefore, if you have a customer that may be vulnerable, please make sure you record this on OMS and ensure you are talking to them about how their vulnerability may affect them and what you can do to help? Further guidance on this can be found in our Vulnerable Customer Policy HERE
- Ensure your fees are in line with the Networks Fee Policy and you are recording your fees in OMS. Connect’s Fee Policy can be found HERE
- Completion of the ‘Insurance Your Needs’ tab is important whether you have protection permissions or not. This part of the fact find helps identify where there may be a need for protection. The identification of a need is part of avoiding foreseeable harm. If you identify a need, you will then either provide the advice yourself, or refer to someone who can do it for you. Connect provides training on Protection each month which for network members is always free. You can book yourself on any training course by accessing the training hub HERE
Like TCF, this is not a ‘One and Done’ exercise. Consumer Duty is an ongoing process, and we must continue to review everything we have in place to ensure it remains appropriate and meets on the ongoing requirements of the FCA. What we saw as appropriate last year, may not be appropriate this year, therefore, we may make further changes. However, these will always be communicated so our network members are fully aware.
Should you have any questions on this, please do not hesitate to contact myself or the compliance team.
Regards
Alan Baldwin
Director of Compliance
For any questions or queries, contact the Compliance Team
Call : 01708 676110
Email : compliance@connectmortgages.co.uk