Consumer Duty: “Treating customers fairly on steroids”
For many peer-to-peer lending platforms, who are used to extra scrutiny from the regulator, complying with the new Consumer Duty hasn’t been that big of a problem, industry insiders say.
The Financial Conduct Authority’s new Duty came into force on 31 July, requiring regulated financial services firms to put customers’ needs first.
For Paul Auger, chief operations officer at Kuflink, the concept behind the Consumer Duty has been around for several years, it’s just that now it is “treating customers fairly on steroids”.
Read more: Rebuildingsociety says consumer duty is pivotal for P2P lending
And although it has mainly resulted in some tweaks to practices – like changing frequently asked questions and explanations on websites to make them as clear as possible – rather than any major overhaul, it is just another way that the cost of compliance is increasing for firms.
Although some have previously argued that the Duty might lead to stricter lending criteria, according to Brian Bartaby, chief executive of Proplend, the new rules shouldn’t lead to such drastic changes.
“We have a fairly well-structured credit policy we built over the years,” he said. “If you’re making changes to your credit policy based on the Consumer Duty, then it wasn’t right in the first place.”
Read more: Consumer Duty could lead to stricter lending criteria
But one area Bartaby thinks might be impacted is client money accounts at other platforms. While Proplend pays the interest from those accounts to the clients, he pointed out that most other platforms retain the interest they earn on client money.
Jatin Ondhia, chief executive of Shojin Property Partners, says that although compliance hasn’t been too difficult, as the platform focuses on high-net-worth, sophisticated investors, it is a shame that there are now a lot of new restrictions on retail investors.
“It’s going against the grain of what crowdfunding is about,” he said.
Read more: Regulator urged to scrap ‘one size fits all’ approach