Customer First Compliance - Consumer Duty & Vulnerable Customers

Customer First Compliance – Consumer Duty & Vulnerability

In the last few weeks, we’ve seen news of HSBC being fined over £6 million by the FCA for “failures in its treatment of customers who were in arrears or experiencing financial difficulty”. The group informed the regulator in 2018 that they had identified issues with their handling of customers in financial difficulty – specifically that between June 2017 and October 2018 there had been failure to consider the individual circumstance’s of customers who had missed payments.

In some cases they had taken “disproportionate action” against people who were behind on repayment commitments, potentially pushing them into further difficulty. They had also repeatedly failed to conduct the correct affordability assessments when setting up repayment plans with customers in arrears.

Subsequently HSBC has spent £185 million on redress payments, and £94 million on identifying and rectifying the failures. Combined with the fine, we’re looking at an extremely costly issue.

Across the industry recently we’ve seen discussion of Arrears and Borrowers in Financial Difficulty (BiFD) as regulatory focus areas that could indicate where products are not right for customers – raising concerns relating to customer outcomes.

Speaking of which – we’re rapidly approaching the deadline for the first Consumer Duty Board Report required by the FCA. We all have a clear idea of what the regulator are looking to see here – they’ve reiterated on a number of occasions that the key to achieving those positive, right-first-time outcomes is continual re-assessment and improvement. I expect firms who have taken this approach beyond their initial Consumer Duty transformation projects will have little to worry about come July 31st. However, businesses who have treated the new Consumer Duty rules of 2023 as a one-and-done box-ticking exercise are sure to face close scrutiny – even if they consider themselves to be delivering “delivering good outcomes” for their customers.

The FCA will be looking at what firms are doing in relation to MI and outcomes testing – and any business declaring they are already at “platinum standard” could be a red flag. Arguably after only a year in effect, it would be very unlikely for a firm to already be doing everything perfectly at every stage. Instead, it’s going to be important for organisations to present a narrative of an ongoing journey – what gaps they’ve identified, how they’ve addressed them, how the effectiveness of those new measures has been measured, what that data tells them about what else needs to change, etc.

It’s worth noting that the HSBC fine comes under pre-existing rules, but I expect similar issues we see going forward will incur an even stronger response from the FCA. The current Consumer Duty rules thoroughly foreground the expectation for firms to always be prioritising the best possible outcomes for all customers – and in addition to that, we know that the treatment of vulnerable customers has been a regulatory focus in and of itself for the past few years.

A high profile compliance failure that falls foul specifically of outcomes for vulnerable customers would be disastrous – with a risk of large fines, expensive remediation payouts and serious reputational damage in the eyes of the public. It’s a very good sign, I think, that HSBC identified the issue themselves and informed the relevant regulatory – that kind of positive Compliance culture is the exact opposite of the “wait until the FCA steps in” approach that firms must not fall into.

Kind Consultancy is currently assisting a number of Financial Services firms with Consumer Duty and vulnerable customer related needs, including report reviews, thematic monitoring, outcome testing and the supply of interim and contract Consumer Duty SME’s.

For a confidential discussion about your needs and how Kind can help, get in touch today on 0121 643 2100 or

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