Two-thirds of UK lenders admit they are yet to fully review the Financial Conduct Authority’s (FCA’s) new Consumer Duty requirements.
The regulations will come into force at the end of July, setting higher and clearer standards of consumer protection across financial services, and requiring firms to put their customers’ needs first.
However, new research from AI-powered transaction analytics firm, Fuse has found that 61 per cent of lenders admit they will need to turn to external expertise to meet regulatory requirements.
“Lenders are under huge pressure to bring in the much-needed changes the Consumer Duty demands but, less than two months out, it appears the vast majority are unprepared,” said Sho Sugihara, chief executive and co-founder of Fuse.
Firms are required to not only act to deliver good customer outcomes, but to understand and evidence whether those outcomes are being met.
In addition to this, they must ensure fair outcomes for vulnerable customers.
The heightened focus on improving consumer outcomes comes at a vital time given the growing consumer reliance on credit.
However, 72 per cent of lenders believe that the regulatory change has come at a financially challenging time for their business and, 22 per cent of lenders say the cost-of-living crisis has already reduced the number of loans provided.
“Lenders need more support ahead of the Consumer Duty deadline,” Sugihara added. “With the cost-of-living crisis contributing to a growing consumer reliance on credit, they are performing a critically important role in supporting millions struggling with rising costs.
“In the long-term, the Consumer Duty needs to kickstart a transformation across finance to ensure it becomes more personalised and outcomes-driven for borrowers. In order to build a more effective and fairer financial system, lenders should supplement traditional affordability criteria with a more holistic view on whether a product will provide a consumer with good outcomes.”