What impact will the new Consumer Duty have on the mortgage industry
In July 2023, the FCA’s new Consumer Duty will take effect. The guidelines have been set out by the regulator to improve standards across financial services and ensure firms are delivering the best possible outcomes to customers.
The level of impact that the framework will have will vary from company to company depending on its existing practices and how closely they may already be following the guidance.
In this blog, John Tilzey, Sales Director at finova, outlines the biggest impacts the Duty will have on the mortgage industry, with a particular focus on standards, customer vulnerability, and the future of broker onboarding.
- Setting a new standard
The new set of principals are not a target for lenders to strive towards, they are a benchmark. It will not be good enough for firms to say that they are working on implementing the necessary measures, the measures must already be in place, and companies need to be able to evidence this.
There will naturally be an increased reliance on accurate management information (MI) reporting so firms can demonstrate to the FCA that everything from the products they offer, to the quality of service provided by brokers, is in order. There is little use in having the best products on the market if they do not have the customer service to match, and vice versa.
Mortgage businesses should lean on technology to help ensure they meet these standards and improve their internal and external communication. With the right tools, businesses can run an efficient back office with an integrated servicing platform, ensuring that clients receive accurate, relevant, and timely information. Once collected, this data can be tracked and fed back to the FCA to ensure reporting standards are met clearly and efficiently.
- Spotlighting customer vulnerability
Managing customer vulnerability has always been important to all mortgage businesses, but over the past few years it has been propelled even further into the spotlight by the COVID-19 pandemic, and most recently by the cost-of-living crisis. Vulnerability comes in a variety of forms and can be difficult to identify, and justifiably, the new Consumer Duty has put a big spotlight on the issue. All businesses must ensure they are in a position to spot vulnerable borrowers and understand what steps they need to take next.
While it is senior management who are responsible for introducing the Consumer Duty policy, it is frontline sales workers and brokers that are actioning it. Those individuals in customer facing roles need all necessary training to be able to manage vulnerability and regular checks to ensure it is being maintained. It is crucial firms dedicate time and resources to making sure its frontline staff are equipped with all the insight they need to deliver the best outcomes to all of their customers.
- Broker onboarding
The objective of the new Consumer Duty is to protect the end customer, and all businesses within the mortgage process are working to achieve this goal. However, by working closer at all stages, brokers, lenders, conveyancers, et al can help meet the required standard in a more efficient manner. Brokers and lenders, for example, can work together more closely from the very beginning of the business process. For many of the lenders we work with, ensuring good customer outcomes starts with onboarding the right brokers. The new framework has only made due diligence more important and should compel lenders to make far more considered choices when selecting brokers to do business with.
Again, lenders can lean on technology to help, with tools such as our Broker ID platform that enables onboarding teams to carry out fully comprehensive checks – digitally verifying a broker’s credentials, background information and risk assessments, so all the information is compiled in a clear and efficient manner to save time for both the lender and the broker. Then, with the right brokers on the panel, lenders stand the best chance of meeting the new Consumer Duty regulations and providing the best service to customers.
July is just around the corner, however a recent survey by the FCA of companies Customer Duty implementation plans found “some firms may be further behind in their thinking and planning for the Duty.“ The plans also highlighted 3 areas where firms should focus their attention on the remainder of the implementation period, including effective prioritisation and working with other firms.
Finova is actively assisting its clients in preparing for these changes and ensuring Customer Duty is embedded in our products and services.
If you want to hear more about how the changes may impact your business, and how finova can support you, please contact firstname.lastname@example.org