The lack of detail around how Consumer Duty should be applied will allow the industry to shape and fine-tune its measures, it was said at The Mortgage and Protection Event (TMPE) this week.
Speaking on a panel, Andrew Gething, founder and managing director of MorganAsh, said the duty was principle-based and deliberately vague, which gave the sector the “opportunity to set what those measures are from that point of view”.
He said those measures still had to be right and deliver good outcomes, but “being not prescriptive gives us leeway” to fine-tune this over time.
Gething said: “I was with the FCA [Financial Conduct Authority] last week and they said ‘the problem with Treating Customers Fairly was we didn’t enforce it. We’re not going to make that mistake again’.
“So, they will be enforcing it.”
Referring to fines imposed on TSB and Volkswagen Finance, Gething said the regulator would go after bigger firms first then the smaller ones.
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He said he had clients who had already received notices, adding: “It will happen”.
This followed comments made by Jess Rushton, head of business development at Smart Money People, who said because the regulator was being vague in how the duty should be applied, firms could navigate by benchmarking their practices against other businesses and enquiring what others were doing.
She said having a high rating on a customer review site or a lack of complaints did not necessarily mean people were getting good outcomes.
Kelly Melville-Kelly, director of risk, policy and compliance at the Equity Release Council (ERC), said with Treating Customers Fairly, it was easy to say good outcomes were being delivered and vulnerable customers were being recognised.
“Where the duty takes it even further is they’re saying ‘prove it’, it is the ‘prove it duty’,” she added.
Document improvements in Consumer Duty practices
Melville-Kelly said the Financial Ombudsman Service (FOS) was now looking at complaints “with a Consumer Duty hat on” and found lenders and advisers did not seem to be understanding customers’ needs at different times.
She gave an example, saying that a customer may not have understood the information given by a firm but there was no evidence that this had been subsequently corrected. Melville-Kelly said there also needed to be more tailoring and personalisation of services, as the ombudsman was not seeing enough of this.
Melville-Kelly said if a firm did get a complaint through from the FOS, instead of panicking, there was a helpline that would offer advice on how this could be rectified.
“What they’re asking firms to do is consider Consumer Duty in their responses [to the FOS]… they’re getting all these lovely reports back but firms aren’t mentioning the duty and what they’ve done over and above since July 2023,” she added.
Gething agreed, saying not documenting this meant firms had no proof of what they had done to address issues in compliance with Consumer Duty.
Identifying and understanding vulnerabilities
Gething said there was “an awful lot of good work going on” under the duty, but said advisers needed to identify and monitor a client’s potential vulnerabilities over the lifetime of a product and measure the outcomes, as well as how this differed for those who were resilient and those who had vulnerabilities.
He said there may be nothing advisers could do about any differences in outcome, but it was important to understand that they were happening.
Rushton said it was important to document any possible vulnerabilities because “the worst possible thing you can then do is ask them the question again. Imagine forgetting that they’re in that situation?
“Having some way of documenting these things… will make you better for your customers.
“That’s what makes your customers come back.”
Gething said that, in the sector, there was a “big fear about asking questions about health and personal information. That is a fear that is unjustified”.
He said in his experience, “a lot of people want to tell, they want to say ‘I have this disability, I want you to take that into account’ and it’s a relief to them when they get a reaction”.
Gething added: “Generally, they don’t volunteer it because quite frankly as an industry, we’ve just never done anything with it… so we have to be proactive and ask.”
Interested in attending The Mortgage and Protection Event? The conferences continue next week in Southampton (13 November) and London (14 November).
To register, click here: https://www.mortgagesolutions.co.uk/events/mortgage-protection-event/
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