Consumer Duty - Q&A with CSA Head of Policy

CSA Head of Policy Henry Aitchison was speaking to Credit Management Magazine.

What do you think of the new duty? Has it gone far enough?

 Being politically rather than evidentially driven, the Consumer Duty was always going to be difficult to bring to life in a way that found that crucial point of balance between consumer and firm - between necessary regulation and social policy. On paper at least, the FCA has achieved a skilful balance. Whether it is effective in practice, or suffers from unintended consequences, remains to be seen.  

How will it impact your member’s day-to-day operations? Is the timescale for implementation too tight? Where do you see issues arising in terms of implementation?

 Every business is different, so how the Consumer Duty influences those businesses will vary considerably. For some, it may mean relatively little change. For others that change might be more profound. The challenge that all firms will be facing is a need to get under the hood to see what they are already doing, how they are doing it, the information that they have and the extent to which those processes and practices line up with the Consumer Duty as a whole and the four outcomes in particular. That is no small task and the timetable for implementation is ‘challenging’ to put it mildly.

But before all that, the biggest challenge is in trying to work out where your firm fits in the FCA’s design. Many of the concepts are straightforward if you are designing a loan or credit card and then distributing it. For sectors that don’t have that ‘linear’ relationship to the transaction or the consumer, the first challenge is in working out precisely how the Consumer Duty touches the business, and what outcomes are relevant, and only then starting to work through the expectations that the Rules and Guidance set out.

How will the new duty affect the marketplace? Will it increase competition?

 It is far too early to tell what the effect might be on the marketplace, still less what implications there might be for competition. As with implementation of the Consumer Duty, there will be an element of seeing what the impact is in client sectors before forming a view of how that might translate into influencing debt purchase and collection markets. In many respects, and notwithstanding the areas of ambiguity, our markets are well placed already to apply the Consumer Duty.

Some challenges can be expected to be largely unchanged, such as different client demands or managing the tension between those and situations where the debt collector believes its own approach achieves a better outcome. Due diligence in the purchase of portfolios will be largely unchanged, but the Consumer Duty should in theory make that slightly easier by requiring vendors to provide adequate information - an incremental improvement.  Other aspects will be entirely new, such as not merely tracking whether a customer was referred to debt advice but what the outcome of that referral and that advice was. How those affect markets or competition are as yet unclear.