How Brokers and Lenders Jointly Manage Responsibilities
The Consumer Duty has pushed every firm in the consumer credit market to rethink what “good outcomes” truly mean in practice. For lenders and brokers, one of the most challenging areas remains the management of distribution chains — an ecosystem that often involves multiple intermediaries, digital partners, introducers, affiliates, and comparison websites. Although each party may only play a small part in the journey, the FCA has been increasingly clear that every link in the chain contributes to consumer outcomes, and therefore every firm shares responsibility for ensuring those outcomes are positive.
The regulator has devoted consistent attention to distribution chains over the past year, and with good reason. Consumer harm rarely stems from a single cause: it emerges from a combination of unclear communications, misaligned incentives, poor oversight, inconsistent disclosures, and misunderstandings about product purpose. In many cases, these issues begin long before the customer reaches the lender. A consumer’s understanding of a product — or misunderstanding, in many cases — is often shaped by brokers or lead generators who introduce the loan. Under Consumer Duty, that initial influence carries real regulatory weight.
Why distribution chains remain such a concern
One of the FCA’s longstanding criticisms of the consumer credit sector is the fragmentation of responsibility. A single customer journey may pass through several parties before reaching the lender, and each may present the product in a slightly different way. The regulator has repeatedly highlighted concerns around:
- Lenders not fully understanding how their products are being presented by brokers or affiliates
- Brokers relying on outdated or oversimplified product explanations
- Lead generators using aggressive or misleading sales techniques
- Digital pathways that obscure key disclosures
- Variations in how vulnerable consumers are identified or assisted
The common theme is a lack of coherence. The Duty expects firms to deliver outcomes that are not only individually compliant, but also collectively fair across the entire journey. A customer should not receive clear, balanced information from the lender at the end of a process if they have been misdirected, confused or over-optimistic at the start.
As the FCA has phrased it, “the customer journey begins before the customer knows they are on it”. For lenders and brokers, that means oversight cannot begin with the application — it must begin with the distribution chain.
Shared accountability under the Consumer Duty
The Duty has removed any ambiguity around roles. Lenders, as product manufacturers, must ensure the product is designed to deliver fair value, is suitable for its target market, and is supported by clear and accurate information. But brokers and introducers — including data providers and aggregators operating under financial promotion rules — are equally responsible for ensuring that customers understand what they are being offered.
This shared accountability has broad implications. Brokers need to have a deeper understanding of the products they introduce, the eligibility criteria, the risks, and the limitations. Lenders, in turn, must have meaningful oversight of the broker’s conduct, training, communications and customer interactions.
In practical terms, shared accountability means firms cannot simply rely on contractual assurances. They must understand and monitor how their partners operate in reality, not just on paper. The FCA has already signalled that “blind reliance” on third parties is unacceptable. If poor promotions, poorly explained products or confusing customer journeys sit anywhere in the chain, the manufacturer will be expected to intervene — and quickly.
The evolving risks facing brokers and lenders
Several themes have emerged across FCA supervisory work over the past year that directly relate to distribution chains.
One of the most significant is the continued challenge of financial promotions, particularly online. The FCA has identified recurring issues where brokers or affiliates present products using over-optimistic language, guaranteed acceptance claims, unrealistic APR expectations, or incomplete eligibility information. These issues are magnified in digital advertising, where character limits, automated optimisation and retargeting can distort the intended message.
Another key risk is the misalignment of incentives. Although commission arrangements have long been part of the consumer credit sector, the Duty requires firms to demonstrate that remuneration does not undermine fair value. The FCA’s work on the motor finance discretionary commission redress scheme has shown just how far the regulator is willing to go when it believes consumers were misled or incentivised into unsuitable products. While the consumer credit market is structured differently, the underlying principles are identical.
There is also an increasing focus on customer understanding and journey design. The FCA has been clear that disclosures spread across several firms, or presented inconsistently, do not help customers make informed decisions. Digital journeys in particular are under scrutiny, especially where comparison tools, pre-approval language or behavioural nudges steer customers in ways they do not fully appreciate.
Finally, monitoring and MI continue to be weak spots. Many lenders still rely on limited data from brokers, making it difficult to identify early signs of harm. Without proper MI, it is impossible to challenge poor outcomes, adapt oversight, or demonstrate compliance under the Duty.
What firms should be doing now
The firms most aligned to the FCA’s expectations are those that have started to take a more integrated, structured approach to distribution governance. This typically involves:
- Mapping the entire chain, including indirect affiliates and digital partners, to understand where customers are coming from
- Standardising communications and disclosures, ensuring that every party presents products in a way that is accurate, balanced and consistent with the manufacturer’s intention
- Revisiting contracts, not just to update Duty clauses, but to embed meaningful oversight mechanisms, reporting requirements and intervention rights
- Auditing partners on a risk-led basis, reviewing promotions, scripts, call recordings, digital journeys and consumer interactions
- Strengthening fair value assessments to reflect the total cost to the customer, including fees or charges introduced by brokers or affiliates
- Improving Board oversight, ensuring distribution chain risks are visible at senior levels and supported by proper MI
None of this requires perfection, but it does require demonstrable control — something the FCA increasingly expects to see.
What this means for the sector
Distribution chains are central to the FCA’s wider work on consumer credit, digital marketing, financial promotions and Consumer Duty outcomes. The regulator has made it clear that firms with long or complex distribution chains should expect more questions, more data requests, and more intervention if outcomes look poor.
Brokers and lenders that have invested in robust distribution oversight will be better placed to demonstrate compliance, protect customers, and avoid supervisory surprises. Those that rely on outdated or informal arrangements risk being caught out in the next wave of FCA reviews.
How ALPH can help
At ALPH Legal & Compliance, we help firms strengthen their distribution frameworks through:
- Comprehensive distribution chain audits
- Introducer and broker oversight frameworks and due diligence
- Financial promotions reviews, including social media and affiliate content
- Consumer Duty assessments, including fair value modelling and outcomes testing
- Governance support for lenders and brokers
- Training for introducers, affiliates and internal teams
Robust distribution governance is now a commercial and regulatory necessity. Firms that embed strong oversight and shared accountability not only reduce risk, but also build far more sustainable customer relationships.
ALPH Legal & Compliance can assist with all aspects of your business’ 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!
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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, ALPH Legal & Compliance is your trusted partner in navigating FCA regulations with confidence.
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