FCA’s Forthcoming Consumer Duty

With a press release titled; ‘FCA to introduce new Consumer Duty to drive a fundamental shift in industry mindset’issued on December 7th, the Financial Conduct Authority made it very clear that it is expecting significant change to ensure financial credit markets work well for borrowers as it gears up for the introduction of the new Consumer Duty.

With the FCA noting that; ‘We would generally expect firms with a direct relationship with the end user to have greatest responsibility under the Consumer Duty;‘ dealers need to be thinking about how well their existing model embraces the outcomes sought by the FCA. These are the governance of products and services, price and value, consumer understanding and consumer support.

Over almost 200 pages, the FCA plan, which is subject to consultation until February 15th 2022, outlines the background of its expectations and draft handbook guidance for new rules, which are expected to be finalised by the end of July 2022.

For dealers, their board or equivalent management body will be responsible for assessing whether it places consumers’ interests at the heart of their activities to deliver the type of good customer outcomes the regulator expects of firms to be consistent with the Consumer Duty.

Having led the market in developing its distinctive risk-based pricing model MotoRate to embrace the ban on discretionary commission, MotoNovo Finance MD Karl Werner is keen to initiate dialogues with dealers about the impact of this model in delivering good customer outcomes, noting;

“I continue to believe wholeheartedly that embracing regulation is a good thing for dealers when it comes to finance. The call to action from the FCA is to ensure that the dealer finance experience, products, and pricing place each customer’s interests at the heart their business. This thinking, outlined in previous FCA work, was why we pursued the development of our risk-based pricing model and its tailored approach. 

I welcome the opportunities to discuss our learnings from this innovation with dealers; suffice to say, it is improving dealers’ finance penetration, and the feedback from consumers continues to be exceptionally good. Adopting risk-based pricing does require some different thinking by dealers and I believe that is what the regulator’s press release suggests they are looking for.”