The Financial Conduct Authority (FCA) has unveiled plans to introduce a new consumer duty for peer-to-peer lenders, and all regulated firms, to follow.
Here is how it expects firms to comply.
The City watchdog wants to boost consumer protections.
Regulated firms already have a responsibility to treat customers fairly but the FCA wants to make this more explicit.
It is proposing a new consumer duty to be introduced by 31 July 2022 stating that “a firm must act to deliver good outcomes for retail clients.”
Financial services firms, including P2P lenders, will be required to test and show that their communications are clear and that consumers are receiving good outcomes.
“Under the consumer duty we would expect firms to consider the likely outcomes their customers will receive, from product or service design and through their full lifecycle,” the FCA said.
“We would expect firms to monitor, assess, understand and be able to evidence the outcomes their customers are receiving.
“Where firms identify that consumers are not receiving good outcomes, we would expect them to take appropriate action to rectify the causes.”
Company boards will be expected to regularly review reports on how firms are meeting the consumer duty and any data and evidence must be ready to be presented to the FCA if requested or supervisory and enforcement action could be taken.
The FCA hasn’t proposed any specific ways for firms to measure how they comply with the consumer duty.
But here are some of its suggestions that could apply to P2P lenders.
The FCA suggests firms could analyse customer retention records to see why users are leaving as this could flag poor treatment.
Firms could test digital promotions and use different communication channels to assess responses.
This may reveal where firms need to improve policies, processes and systems such as where there are barriers to consumer engagement or understanding, the FCA said.
Read more: Additional P2P regulation predicted
Training and competence records
Platforms could check records of staff training, including remedial actions where staff knowledge or actions are found to be below expectations.
Customer files could be checked for errors or to see if they got good outcomes, the FCA proposes.
The FCA suggests using formal and informal feedback from customers to identify trends and areas for improvement such as complaints made directly to the firm and also on social media.
Firms could also look for trends in complaints to see if there are any underlying causes or issues, the FCA said.
Another suggestion is that customer experiences could be tested through mystery shopping, auditing, focus groups and deep dives.
The FCA said staff should also be able to offer feedback about where they think processes could be improved.