Preparing for Consumer Duty: A checklist for dealers and lenders
With the Financial Conduct Authority's (FCA) new Consumer Duty regulations coming into force in July 2023, the motor retail space is facing increased scrutiny over how they treat their customers.
The pressure is on for financial service providers to ensure they are meeting their obligations to deliver good outcomes for retail customers.
In this blog post, we will discuss five core areas of consideration for dealers and lenders as they prepare for the introduction of Consumer Duty. We will cover governance, conflicts of interest, culture, communications, and training, and explain how each of these areas can help firms put their customers' needs first.
What is Consumer Duty?
Consumer Duty is a new set of rules created to improve how financial services firms treat their customers. The new Duty "sets higher and clearer standards of consumer protection across financial services, and requires firms to put their customers’ needs first." All financial service providers that are regulated by the FCA and offer products or services to consumers must follow these rules.
The FCA expects the Duty to be reflected in the strategies, governance, leadership, and people policies of all regulated firms. In the motor retail space, this applies to car dealers and finance providers and can be distilled down to three main areas: The Consumer Principle, Cross-Cutting Rules, and Four Outcomes.
Key Dates to remember
It's essential to understand the key dates that you should be aware of to ensure compliance with Consumer Duty regulations. Manufacturers must complete reviews to meet the outcome rules by 30 April 2023. On 31 July 2023, the rules will start for open products/services, and on 31 July 2024, the implementation deadline will start for closed products/services.
Checklist for Consumer Duty Compliance
To help dealers and lenders prepare for Consumer Duty, we've compiled a checklist of five core areas of consideration. Firms should adopt these practices ahead of the regulation’s introduction and employ them consistently as part of their continuous improvement plans.
- Firms must have effective governance arrangements in place to ensure that they prioritise the interests of their customers.
- The board should be aware of the significance of Consumer Duty and of the FCA’s expectations.
- A ‘Consumer Duty champion’ should be allocated at board level.
- Firms should establish a project group with relevant stakeholders (legal, compliance, IT, marketing, product).
- A board-approved implementation plan should be in place.
- Firms should ensure these actions are on track for delivery by 31 July.
Conflicts of Interest
- Firms must manage conflicts of interest fairly and effectively to ensure that they do not harm the interests of their customers.
- In-scope products, services, customers, channels, processes, etc should be identified.
- Firms should consider how external factors might impact on their current products, services, and processes.
- Firms must foster a culture that supports the delivery of good customer outcomes.
- Good outcomes must be defined for all customer touch-points and build the measures, management information, and the reporting required to support them.
- Regular reviews should be conducted of data management processes.
- Data collection processes should be improved.
- Firms must ensure that their communications with customers are clear, fair and in no way misleading.
- Customer journeys and key touch-points should be documented.
- Firms should engage with other parties in the chain to clarify their roles and responsibilities, agree data sharing practices and any other details.
- Firms must ensure that staff have the necessary skills, knowledge and expertise to deliver good customer outcomes.
- Appropriate training should be carried out for all relevant staff.
It is important to note that implementing Consumer Duty is not just a box-ticking exercise. It is an opportunity for firms in the motor retail space to enhance their customer relationships, build trust and confidence, and ensure their customers are able to pursue their financial objectives.
With the implementation deadline fast approaching, it is crucial that firms act now to ensure they are fully prepared to meet the new requirements under Consumer Duty.
How iVendi can help you meet your Consumer Duty obligations
iVendi's suite of self-service tools can help dealers and lenders meet their obligations under the new Consumer Duty regulations. Customer self-service is becoming increasingly popular in the motor finance industry as it allows customers to have greater control over their accounts and transactions, as well as providing a more convenient and faster service.
Our Connected Retailing Platform provides customers with a range of self-service tools, including product suitability assessments, informative product videos, easy comparisons of multiple finance products and finance lenders, and an audit trail of transactional activity. In addition, the solution also offers bespoke lender information, signposting to support resources, application interceptions, and finance checking options. By providing clear and simple information, customers can make informed financial decisions with confidence.
Customer self-service also benefits the retailer. By allowing customers to complete transactions independently, sales staff can focus on providing personalised advice and support, enhancing the overall customer experience. It also reduces the risk of mis-selling, as customers are empowered to make informed decisions and can access all relevant information at their own pace.
Customer self-service isn't just for online customers. Our innovative Digital Deals can be used for both online and showroom customers, making it the best approach to meeting the new requirements under the new Consumer Duty regulations. By implementing Digital Deals as part of a self-service approach to the finance journey, dealers and lenders can ensure they meet their obligations under the new regulations while also delivering a superior customer experience.
Our latest white paper, Navigating Consumer Duty Regulations in the Automotive Sector: The Role of Technology in Achieving Compliance and Enhancing Customer Experience has been designed to help you to better understand how you can meet Consumer Duty regulations with the right technology, helping you to deliver good outcomes for consumers and enhance customer experience.
Not Sure Where to Start?
Our new Consumer Duty Ultimate Bundle is the perfect product mix created to support dealers in meeting their requirements under the new FCA regulations, designed to satisfy the four outcome areas while aligning sales journeys with the three cross-cutting rules.
Dealers can easily upgrade their existing technology stack to the new package, which includes all the features they need - finance calculators, online and showroom finance checking, multi-lender quoting and submission, vehicle reservations, FCA and commission disclosure status, lender-specific product information, lender product videos, product suitability assessments, support services signposting for vulnerable customers, customer credit rating, stock engine, customer self-serve tools, online finance applications, iVendi’s Digital Deal, application interceptions and comprehensive management information.
Learn more about how iVendi's Connected Retailing Platform can help strengthen your compliance strategy.