Where Credit Firms Should Focus
It has been just over a year since the FCA’s flagship Consumer Duty came into effect for most retail financial services firms, including credit brokers, lenders, and consumer credit providers. For many businesses, this has been the most significant regulatory shift in the past decade – reshaping expectations around culture, governance, and customer outcomes.
So, where should consumer credit firms focus their attention in the second year of Consumer Duty implementation? And what practical steps can firms take to ensure they are not just compliant, but also aligned with the FCA’s supervisory priorities?
FCA’s Findings So Far
The FCA’s July 2024 review of Consumer Duty implementation highlighted both positive progress and areas of concern. In particular, the FCA noted that while many firms had made strong initial efforts – producing implementation plans, testing products and reviewing customer journeys – too many still treated the Duty as a ‘box-ticking exercise’ rather than a fundamental cultural change.
Key areas where credit firms fell short included:
- Testing outcomes with sufficient evidence – the FCA stressed that firms must not only claim to deliver good customer outcomes but must be able to demonstrate this with data, MI and customer feedback.
- Product and service governance – the regulator found that some credit firms had not gone far enough in assessing whether their credit products deliver fair value, especially in higher-risk segments such as guarantor lending and high-cost credit.
- Consumer support – weaknesses were found in the accessibility and quality of customer service, particularly for vulnerable customers and those experiencing financial difficulty.
- Oversight of distribution chains – for credit brokers, ensuring downstream partners comply with the Duty, remains a major supervisory focus.
Practical Priorities for the Year Ahead
With the FCA making clear that enforcement will follow where standards fall short, credit firms should focus on five key priorities:
1. Embedding Evidence-Based Outcomes
Firms must move beyond policies and produce tangible evidence of how customers are being supported, treated fairly and receiving fair value. Regular MI reviews, thematic QA checks and customer outcome testing are essential.
2. Enhancing Product Governance
Credit products should be re-tested for fair value, affordability and suitability. This is especially critical for firms in subprime markets or those offering niche lending solutions.
3. Strengthening Vulnerable Customer Support
The FCA expects firms to have clear strategies for identifying and supporting vulnerable customers. For credit firms, this means enhanced staff training, improved communication channels and proactive engagement with customers showing signs of financial stress.
4. Oversight of Third Parties
Brokers and lenders must enhance due diligence and monitoring of partners and introducers. Where services are outsourced, there must be oversight frameworks ensuring Consumer Duty standards are applied consistently.
5. Culture and Governance Alignment
Boards and senior managers must demonstrate active oversight of Consumer Duty compliance. Minutes, reports, and strategic decisions should reflect a focus on customer outcomes, not just compliance checklists.
How ALPH Legal & Compliance Can Support Firms
At ALPH, we are working with consumer credit firms across the sector to embed Consumer Duty compliance in a way that is both practical and proportionate. We support firms through:
• Independent business and compliance reviews to benchmark Consumer Duty implementation against FCA expectations.
• Operational audits and QA to test customer journeys and evidence fair outcomes.
• Policy development and implementation, tailored to credit-specific risks.
• Compliance oversight frameworks for boards and senior managers.
• Strategy reviews to ensure commercial goals align with regulatory expectations.
The FCA has made it clear: Consumer Duty is not a one-off project, but an ongoing cultural shift. Firms that take this seriously – embedding customer outcomes into their governance, MI and oversight – will not only reduce regulatory risk but also build stronger, more sustainable businesses.
If you would like to discuss how ALPH can help your firm strengthen Consumer Duty compliance, contact us.
ALPH Legal & Compliance can assist with all aspects of your business’s compliance needs, whether that be compliance structure and policy, internal/external audit, business and regulatory change support, authorisation, supervision or just some general expert advice and guidance!
With all the regulatory shifts on the horizon, now is the time to act. Don’t wait until compliance gaps appear—engage with ALPH Legal & Compliance today to ensure your firm is ahead of the curve. Whether you need tailored guidance, compliance support, or strategic insights to drive new business, we are your trusted partner in navigating FCA regulations with confidence.