Pepper Advantage UK Ceo, Gerry McHugh

What is consumer duty?

Many have asked this question in the UK as the FCA’s new Consumer Duty rules have come into effect. While these rules don’t define consumer duty per se, they do require financial services firms to put consumer duty into practice by acting to “deliver good outcomes for retail customers.”


“Good outcomes” are also not easily defined, but the FCA’s guidance directs firms to deliver such outcomes across four areas:

  • Consumer understanding
  • Products and services
  • Price and value
  • Consumer support

In other words, firms must provide consumers with information they can easily understand, offer products and service that are fit for purpose and provide fair value, and give helpful customer service that meets consumer needs without putting up unnecessary barriers.


To achieve good outcomes, the FCA requires “firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey. As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.”


This begs the question, how does a company translate consumer duty into action, much less provide evidence that it is doing so? It is a topic we have focused on at length, and we wanted to share some of our findings as the new consumer duty rules came into force on 31 July 2023 for new and existing products or services that are open to sale or renewal (they will come into force on 31 July 2024 for closed products or services).


How to put Consumer Duty into Action


As a customer-focused business, we see these changes in a positive light and an extension of what we do today. They provide regulatory structure around our customer efforts and raise useful questions around outcome scrutiny and evaluation that is particularly timely as rising interest rates and cost of living challenges put consumers under pressure and technological advances change the way we work.


The impact the rising cost of living is having on consumers was clear in the FCA’s 2022 Financial Lives Survey, which found that 24% of respondents surveyed in January 2023 are in financial difficulty and/or finding it difficult to pay their bills, up from 18% in May 2022. Moreover, the FCA’s 2020 Financial Lives Survey found that only 42% of UK adults had confidence in the UK financial services industry. People with characteristics of vulnerability and the over-indebted were even more likely to lack confidence in the industry. These surveys demonstrate why regulation that requires good customer outcomes – the concrete result that arises from prioritising consumer duty – is so important.


To prepare for the implementation of the Consumer Duty rules, we examined our key processes through the customer’s eyes, focusing on four lenses:

  1. Customer Journey – does the customer journey:
    • Allow the customer reasonable time to consider options and act in their own best interest?
    • Avoid any unnecessary delays?
    • Reduce impacts of non-financial costs to the customer (e.g., effort, access)?
    • Identify vulnerable and potentially vulnerable customers and allow time to intervene when appropriate?
    • Include ongoing monitoring that allows us to continuously evaluate the quality of outcomes?

  2. Customer Communications – are they:
    • Clear, unambiguous, and easy for the customer to understand?
    • Timely and clear on any call for action?
    • Suitable for vulnerable customer groups?
    • Continuously scrutinised for further improvement?

  3. Customer Costs
    • What are the fees and charges applied during the customer journey?
    • Are they fair and reasonable?
    • Is it clear to the customer what they are?
    • Are there situations where it is unfair to charge a fee or where fees could cause harm for any customer groups, especially those with vulnerabilities?

  4. Customer Options
    • Is there more than one choice of communication channel available for the customer? And if communication channels are limited, are we confident there is a customer-based reason as to why?
    • Are other communication channels available at appropriate times?
    • Where there is only one communication channel available, does the process have sufficient checks and balances to prevent foreseeable harm?


Reviewing every aspect of our business through these lenses allowed us to identify ways to improve, particularly in areas such as customer communications and outcome monitoring. These improvements include:

  • Upgrading and improving hundreds of customer documents so they are clearer and easier to understand;

  • Delivering new and continuous team training on what good outcomes look like across numerous customer scenarios; and

  • Identifying data points that allow us to continually analyse and track good outcomes within our systems.

This last point is one that is worth calling out as it points to the future state of the industry. Identifying opportunities to capture, enrich and connect data points – particularly those relating to outcomes, e.g. servicing performance, call sentiment, quality assessments, and forbearance effectiveness – and using continuous data analytics to monitor for good outcomes is core to our business and will become even more prominent in future. Technology has advanced now to a point where it is possible to develop systems that have good outcome monitoring built into them.


This approach to product development sits at the heart of our global strategy as we build our credit management platform. Leveraging data and technology effectively will enable us to create products that can constantly monitor and evaluate the service we deliver to borrowers and therefore help us ensure customers continue to get the good outcomes they deserve.