Everything you need to know about Consumer Duty

On 31 July 2023, the UK financial market had to comply with a package of new changes introduced by the authorities. Under the term Consumer Duty is a series of regulations, the main aim of which is to protect you as a customer from the possible consequences of individual financial decisions and to improve the standard of service for retail customers. What does Consumer Duty change in the mortgage market? Will it affect your mortgage? These and many other questions will be answered in this article.

Consumer Duty - key facts

For busy individuals, we have compiled a list of the key changes resulting from the enactment of the new legislation:

• According to the Financial Conduct Authority (FCA), Consumer Duty has been introduced to force an even higher level of transparency and honesty among firms in the financial industry;

• The introduction of Consumer Duty has resulted in even better and faster access to information that can influence your financial decisions. This means that key details cannot be buried in elaborate contracts and terms and conditions;

• Consumer Duty has meant that your adviser will have to highlight your weaknesses, such as not knowing the local culture or having a low level of language skills;

• Consumer Duty is set to equalise the price of financial services in the UK;

• The new regulations place even more emphasis on strict product customisation.

Naturally, a number of formal changes have also been introduced, which we will address later in this article.

What will the new regulations give borrowers?

If you are already repaying your mortgage, you will probably not feel the changes at all. Of course, your communication with the bank should be a little faster, but the biggest differences will occur in terms of sales service.

Above all, as a new client you can expect less intricate, though not necessarily poorer, documentation. The main thrust of the CD is to give you more security, but the changes made do not affect brokers like Extend Finance to any great extent. From the outset, we have strived to ensure that our clients know exactly what they are signing up to, but this is not necessarily standard in the financial market.

From 31 July, we must suggest that you purchase life cover and income protection. If you do not opt for the products we suggest (which you are perfectly entitled to do), we will require you to sign a declaration to that effect, which will become proof that we have complied with all our information obligations. It is this type of procedure that is the main effect of the changes to the regulations - everyone needs to be sure that the product you choose meets your requirements and that you are aware of exactly what you are agreeing to.

Equally importantly, the new rules introduce a requirement to identify the specific needs of the client. This is a rather broad and inexact term, but in practice, it is about paying attention to aspects that may affect the quality of the decisions you make. For example, if English is not your first language, we should recommend that you seek the services of a translator so that you have extra confidence that you know exactly what contract you are signing.

If you are making a major decision shortly after the occurrence of any personal problems (death of a partner, divorce, long-term illness), we should also take these events into account. If you do not want to externalise these types of details to your broker, which is perfectly normal, rest assured - no one will ask about it.It’s simply a matter of getting specific risks out of the conversation that you may not be aware of in a financial context.

Finally, Consumer Duty has reduced price disparity in financial services. The national regulator can penalise a firm that offers exactly the same thing at a much higher rate than its competitors. Of course, each firm can shape its pricing policy as it wishes, but it is no longer a completely free market. This solution is sure to please those looking for a broker whose fee is, after all, part of the cost of buying property in the UK.

How will I know if my financial services provider is complying with Consumer Duty?

If you don’t know whether the new rules protect you, start by taking a simple step - on the website of the firm you are a client of, there should be an FCA reference number - in our case, it is 79241. We should also add that it should be at the bottom of the page. If you cannot get to this information, you should be very careful - it could be a signal that the firm in question does not meet all the formal requirements to operate in the UK market.

What if you think your broker or another company is in breach of regulations? You can report any such situation to government authorities, and you can find details in this article. We also encourage you to read the article on 5 things to ask your Extend Finance adviser.

Does Consumer Duty make mortgage advisers unnecessary?

As we have already mentioned - the main reason why the FCA introduced Consumer Duty is to provide consumers with more security. We already notice that the media messages of banks and insurance companies are clearer and easier to understand, but are there big differences?

We can certainly say that, as a Polish mortgage broker, we have as much or even more work to do. Regulations have not affected the variety and number of offers from banks, and this means that choosing the right product yourself is still not easy. Regardless of the regulations introduced by the government, it is always worth contacting an adviser, as we will pay attention to details that many people simply forget about. It is with Extend Finance that you can choose a mortgage that maximises your costs and is as cheap as possible given your situation and current circumstances.

Summary

Consumer Duty not only protects you as a consumer, but also helps us to provide you with the best possible product. We pride ourselves on having up to 100% positive reviews on Google and Facebook, and our customers receive real help in choosing financial products. It is through reliability, quality customer service and a welcoming atmosphere that we support hundreds of people through the difficult decision of moving house.

We invite you to contact us - your first consultation is completely free of charge and does not commit you to anything. We will help you choose the right mortgage that meets all your expectations and is not overpriced. Don’t wait, make an appointment today!