Consumer Duty:
Transforming UK Consumer Lending

The new FCA Consumer Duty transforms UK consumer lending. Learn how to deliver positive Consumer Duty outcomes for your customers, build trust, and achieve a sustainable business model.

Consumer Duty 2024

The Financial Conduct Authority's (FCA) new Consumer Duty is a game-changer for UK consumer lending firms.

Moving beyond the Treating Customers Fairly (TCF) principle, it demands a relentless focus on delivering positive Consumer Duty outcomes for retail customers throughout the lending journey.
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What does the Consumer Duty mean for UK consumer lenders?

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Customer-centric approach

The Duty compels a shift from a tick-box affordability assessment to a customer-centric approach. Lenders must gain a holistic understanding of a borrower's financial situation, including income, existing debts, and financial goals. This ensures loans are genuinely affordable and meet the customer's specific needs.
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Vulnerability in focus

The Duty requires heightened awareness and support for vulnerable customers. This includes those with financial difficulties, limited financial literacy, or mental health issues. Lenders must tailor communication styles, offer alternative repayment options, and ensure clear, jargon-free explanations of loan terms.
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Designing with consumer duty in mind

Loan products should be designed with Consumer Duty at their core. Complex structures or features that could be confusing or disadvantageous for borrowers must be avoided. Responsible marketing that accurately reflects the product's features and costs, without pressuring customers into unsuitable borrowing, is essential.
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Transparency is key

Crystal-clear communication is paramount throughout the lending process. All fees, including Annual Percentage Rates (APRs) and any potential exit charges, must be disclosed in a Consumer Duty-compliant manner – clear and upfront. Avoiding complex or hidden charges empowers customers to compare products effectively and understand the true cost of borrowing.
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Supporting the customer journey

Providing ongoing support to customers throughout the loan term is crucial. This includes offering clear and accessible communication channels, readily available information on managing the loan, and early intervention strategies for customers facing financial difficulties. The Duty encourages lenders to create a supportive environment throughout the customer journey.
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Exiting with dignity

The Duty ensures a dignified exit for customers who need to leave loan agreements due to changing circumstances. Excessive exit fees that can trap borrowers in debt are discouraged. Flexible repayment options and clear guidance on the process of responsibly exiting a loan agreement must be readily available.

Embracing Consumer Duty

By embracing the Consumer Duty, UK consumer lending firms can cultivate a reputation for fairness and transparency. This not only fosters trust with customers but also leads to a more sustainable business model.

Firms that prioritise positive Consumer Duty outcomes are likely to experience improved customer retention, reduced risk of complaints, and a positive brand image.

Remember, the FCA expects continuous improvement. Regularly review your lending practices, assess customer outcomes, and adapt your processes to ensure you're consistently delivering positive Consumer Duty outcomes for all borrowers.

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