Shoosmiths LLP
  July 4, 2022 - Milton Keynes, England

Consumer Duty: Know your customer
  by Shoosmiths LLP

The Financial Conduct Authority (FCA) has proposed the introduction of a new Principle that “a firm must act to deliver good outcomes for retail customers” together with three cross-cutting rules and four proposed customer outcomes. The FCA wants firms to put themselves in their customers’ shoes and ask “would I be happy to be treated in the way my firm treats its customers?

Asset Finance, Consumer Finance and Motor Finance products are used by a diverse range of customers which poses a challenge in delivering a good outcome for all types of customers. Knowing their customer base is critical for firms when implementing the Consumer Duty.

5 things firms should be doing now

1. Understanding customers – Consumer credit products are used by all in society. This means that assessing target markets is relatively straightforward, but a customer base is likely to have a range of vulnerabilities. As a first step. firms should analyse their customer base to understand their customer needs including what specific vulnerabilities exist in their customer base.

2. Product risk assessment – Firms should assess the risks posed by their products. Are there risks which mean that products are only suitable for a certain type of customer e.g. are high late payment fees appropriate for a product with high levels of default?

3. Sales channel assessment – Consider what risks sales channels pose to customers.

4. Customer understanding – after identifying customer needs and product risks firms should consider their customer documentation and customer journey. Consumer credit firms have a difficult challenge in meeting the consumer understanding outcome given the prescribed and inflexible nature of consumer credit documents. Layering of information throughout the customer journey will be key for consumer credit firms. Firms should:

5. Monitoring – Firms should devise their Consumer Duty monitoring and records framework showing outcomes monitoring, root cause analysis where customers have received poor outcomes and changes addressing those poor outcomes.




Read full article at: https://www.shoosmiths.co.uk/insights/legal-updates/consumer-duty-know-your-customer