Legal development

Consumer Duty Rules for Specialist Lending Businesses - What does this mean for me

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    On 27 July 2022, the FCA in the UK set out final rules (in PS 22/9) in relation to the new Consumer Duty, together with supporting guidance. In these FAQs, we address some of the common queries being raised by specialist lending businesses when assessing the new rules.


    Where to Start

    I don't have retail clients. Can I ignore this?

    Every specialist lending business will need to undertake the scoping exercise in order to determine whether they are in or out of scope of the new rules.

    At a high level, the duty will apply to persons engaging in regulated activities (firms) in the UK across the retail distribution chain. But the interpretation of this test is nuanced. For example:

    • The rules will apply to an unregulated entity that has purchased or owns a book of regulated products.
    • Some SME lending providers may also be in scope as a result of the rules applying in the same way as sectoral rules in the FCA handbook.
    • UK firms that create, develop, design, issue, operate or underwrite a product or service (manufacturers) may be in scope, even where their products are sold through non-UK distributors.
    • The FCA has clarified that the duty should not unintentionally impact firms that operate exclusively in wholesale markets as part of a distribution chain for retail products or services (wholesale firms), but that is not to say that wholesale firms are wholly out of scope.
    My product governance is already ok. Will I have to make changes?

    Firms that have good product governance may not have much to do, but this will not be the case for a lot of firms. "Ok" product governance is unlikely to be enough to satisfy these new rules.

    The new rules are about focussing on customer protection by bringing more science (through the principle, rules and outcomes) than product governance does.

    Either way, the regulator wants you to "show your workings". It is not enough to use a "finger in the air" test on customer outcomes under the new rules.

    The Outcomes

    Product and services outcome

    I already follow PROD. Is that enough to satisfy this outcome?

    Possibly. The FCA has confirmed that firms complying with existing product governance rules in the Product Intervention and Product Governance sourcebook (PROD) would essentially be complying with the product and services outcome under the duty, although there would be an increased focus on compliance with PROD from the regulator.

    Price and value outcome

    My product is "free". Does this apply to me?

    Yes. Firms must consider if customers pay in non-monetary terms – for example, forgiven benefits.

    Consumer understanding outcome

    Is there anything I need to be particularly focused on?

    Vulnerable customers remain a top priority for the FCA.

    The FCA comments on how firms should consider what an average customer looks like noting, in particular, that one in seven adults have literacy skills at or under an eleven year old.

    Firms will need to have a robust understanding of their customer base to be able to show how they achieve this outcome. Testing communications will become far more important in achieving this. Not all firms do this at present.

    Consumer support outcome

    What does this outcome entail?

    The FCA states that firms should monitor the support they provide, take relevant feedback into account, and look for signs that may indicate their channel offering is not sufficient to meet the needs of their customers. This includes where a firm refuses to offer a client a product or service and the post-rejection support provided.

    Next Steps

    Do the new rules have teeth?

    Yes. We are supporting clients who have had the launch of new products or business lines postponed or blocked by the FCA, as the originator has been unable to demonstrate robust consumer protection processes.

    The FCA specifically highlights that they are working closely with the Financial Ombudsman to improve awareness of the redress system. The new rules will provide a further opportunity to help consumers “know their rights”.

    How long have I got before these new rules come into force?
    • The FCA is proposing that the rules and guidance come into force on a phased basis: 31 July 2023 for new and existing products or services that are open to sale or renewal beyond 31 July 2023; and 31 July 2024 for products or services that are closed by 31 July 2023.
    • By the end of October 2022, firms’ boards (or equivalent management body) should have agreed implementation plans and maintain oversight of their delivery.
    • By the end of April 2023, the FCA expects manufacturers to share key information with distributors to enable all firms to comply in time.

    The FCA expects firms to engage with it if they are considering withdrawing any products so that it can identify if there are any potentially significant impacts on consumers.

    Where can I find more information?
    • Webinar: Final Consumer Duty rules have landed!

    In this webinar, we give our views on the key takeaways set out in Policy Statement 22/9 and what firms should be focused on as part of their implementation plans. You can listen to a recording of the webinar here and download a copy of the slides here.

    • Consumer Duty Weekly sessions

    In September and October, we will be hosting weekly sessions which will focus on some of the important and sectoral issues arising under the new rules. If you are interested in joining those sessions, please email us at

    • Contacts

    At Ashurst, we are experienced in advising clients on the Consumer Duty rules and financial regulation across the board. If you would like to know more, please reach out to Lorraine, Jake, Lee, Matt or your usual Ashurst contacts.

    With special thanks to Sarah Curry and Emily Lemaire for their contribution.