Consumer duty: data, data, everywhere, but does it make you think?
The 31st of July has long gone, summer (?!) is over and the Consumer Duty is 3 months old! So, what now? Most Firms have filed away their day one implementation plans and focus has shifted to day two planning and embedding. In our experience this has led to large number of Firms trying to deliver and still figure out what Management Information (MI) is needed to evidence that they are delivering good customer outcomes.
Even if you think you have all your MI needs covered, Firms must pay attention to the recently published FCA consultation paper (cp23-21) Consumer Credit – Product Sales Data (PSD) Reporting. This paper on reporting standards gives us some great insight into what data you need to be looking to incorporate into your MI suites that will enable you to monitor your customer outcomes and demonstrate compliance with the Consumer Duty. Equally, this is a big step change in reporting requirements and Firms need to be prepared.
In summary, the FCA’s intention is to create 3 new PSD returns for routine submission:
· Sales PSD – submitted quarterly.
· Performance PSD - submitted quarterly.
· Back book PSD – a one-off submission.
So why is this this happening? Here are the three standout items from the paper that caught my eye:
“Data Requirements & Outcome Monitoring” The level of data requirements here runs deeper than ever before and the regulator has clearly stated that they intend to use it to monitor customer outcomes and compliance with the consumer duty. They are particularly interested in insight into customers experiencing Financial Difficulties and irresponsible lending. They also hope to gain valuable insight into Firms’ business models, products and culture. Some examples of the new data requirements are below. This is a significant shift from aggregated product data to customer level information. Firms will likely need to invest heavily to provide the right data.
“Data-Led Regulator” This is another step into the direction of travel the regulator is taking in its ambition to become “a data-led regulator”. The FCA want to create a “data-led” approach to supervision for the consumer credit market. By upping the requirement for regular reporting, they see this as a more efficient and less intensive way of gaining valuable market insight. That may have previously been obtained through ad-hoc data requests and increased supervisory work.
“Unreasonable Burden” As we have seen the new requirements are a big change and so reporting thresholds have been set in an attempt to ensure that only the Firms who have the required resource are best placed to provide the data. All lending Firms which reported more than £500k in outstanding balances at the end of the previous annual period and/or more than £500k in new advances for relevant regulated consumer credit agreements. What’s interesting is that if you meet the threshold, but then later fall below it – Firms will continue to qualify for submission regardless of their size.
Whilst there are no new “rules” to follow as yet, the consultation paper is an opportunity for Firms to review the FCA’s plans, provide feedback and most importantly get prepared. So, some key thoughts for Firms are:
Be sure as to the data points that should be included within your Consumer Duty Dashboards that enable the measurement of customer outcomes.
Give careful consideration to your resource and ability to produce timely, relevant and accurate data. This will include your systems capability.
Ensure that the MI is escalated and considered by your governance structures and that there are feedback loops to continually enhance processes, products and customer outcomes.
The consultation is open until 15 November 2023 with the requirements for the new PSD reporting set to start from March 2025.
We have a highly skilled team who specialise in conduct, culture and governance and acting for a broad variety of clients across financial services.
Do get in touch to understand how we can help.
Drop me a line, Will@avyse.co.uk
