Consumer Duty, Vulnerable Customers and the Changing Regulatory Regime

Earlier this month, news broke that Western Power Distribution had agreed to voluntary redress payments totalling ￡14.9 million following instances of failing customers on the Priority Services Register. WPD accepted Ofgem’s investigation findings, which suggested that the electricity distributor may have failed to fully support some of their most vulnerable customers appropriately, especially in relation to power cuts.

Why is this relevant to us in Financial Services? I think it’s simply a useful indication of the direction that regulated industries in the UK are heading right now. The Priority Services Register is a more formalised approach to designating vulnerable customers, something which has rapidly become increasingly important in the Financial Services space in recent years. As Consumer Duty approaches, I think this is a crucial warning to any business who are confident they’ve been doing ok and aren’t worried about the new principle changing things.?

It feels especially timely this month with the many headlines around the rapidly increasing cost of living. This will create newly vulnerable customers and make those already vulnerable even more susceptible to financial harm. Consumer Duty preparation is vital now – I know it can be easy to get bored of the constant stream of warnings and discussions, but it really is the kind of “big deal” shake-up to how Financial Services is regulated that warrants the constant buzz we’re seeing.?

So what specific lessons could we take from the Western Power Distribution situation if we think about this as a glimpse of the near-future of regulation in our own sector?

I think it’s going to be extremely important to establish clear criteria for vulnerable customers, to document which of your customers do and do not fit that category and to reconsider and perhaps expand the support that those customers are offered. The “right-first-time” requirement of Consumer Duty means just that -?waiting until a customer has been let down once and then trying to correct it is not going to be good enough in the eyes of the FCA. There’s no room for excuses, you need to be Consumer Duty Ready on day 1.?

As the implementation deadline approaches, I think we’re all going to have to stay alert and awake to the pitfalls and possibilities of Consumer Duty – none of us wants to fall foul of a huge fine, and I think we will see some handed out once the new rules come into effect. The new principle greatly expands the potential for investigations, as the FCA will have a justifiable reason for looking closely at the processes of any Financial Services firm.

If you’re interested in a confidential discussion about how Kind Consultancy can help your business get Consumer Duty Ready, get in touch on 0121 6432100 or [email protected]