The Financial Conduct Authority (“FCA”) has published data of its Financial Lives survey which found 7.8 million people are finding it a ‘heavy burden’ to keep up with their bills. This marks an increase of around 2.5 million people since 2020.
The survey, which was carried out between February and June 2022 showed that 1 in 4 UK adults are in financial difficulty or could quickly find themselves in difficulty if they suffered a financial shock, and 4.2 million people have missed bills or loan payments in at least three of the six months before the survey took place. The survey also found that people living in the most deprived areas of the UK are nearly seven times as likely to be in financial difficulty compared to those living in the least deprived areas. It also found that 12% of people in the North East and 10% in the North West are in financial difficulty, while 6% of people in the South East and South West are in the same position.
The FCA has responded quickly to cost of living pressures, in line with its 3-year strategy to prevent serious harm and set higher standards. In early 2022, the regulator affirmed its expectations to thousands of lenders how it expects them to support customers in financial difficulty. Similarly, the FCA successfully engaged with buy now pay later (“BNLP”) providers to improve customers’ terms and conditions. Whilst the regulator doesn’t currently regulate all BNPL products, following the Woolard Review published in 2021, it is expected this will change. The FCA also recently warned insurers to protect their customers from unnecessary add-ons and unfair penalties.
The FCA expect that the upcoming Consumer Duty will set a higher level of consumer protection and require firms to put their customers’ needs first. The Consumer Duty bring in instrumental changes to regulated firms. Firms must have implemented these changes within their business by July 2023 for open book products and July 2024 for closed book products.
Firms preparing for the Consumer Duty must;
- Define what is a good customer outcome for your firm?
- Appoint a Consumer Duty Champion
- Brief all staff on Consumer Duty requirements
- Have a firm implementation plan agreed and evidenced
- Ensure that the new principle and rule implemented in company training and other materials
- Undertake a root to branch review of customer journey (including assessment of MI)
- Review of all communications and financial promotions (including assessment of MI)
- Review of pre and post-sale customer support (including MI)
- Ensure that their product governance processes implemented for both open and closed products (including MI)
- Undertake price and value assessment (including MI)