Consumer Duty – Getting The Best Outcomes For Our Members

Last year our regulator, the Financial Conduct Authority, launched a new set of rules called Consumer Duty.

The aim of launching the rules was to raise standards and trust in financial services, and to improve outcomes for consumers. The idea is that financial services providers, including credit unions, must always act in good faith to customers (in our case members) and avoid any foreseeable harm caused by using our services. The aim is to support people in pursuing their financial objectives.

A recent FCA paper looked at what can affect our choices when looking at financial products, especially loans. The study found:

  • Most consumers find financial products complex
  • Financial decisions involve risk and uncertainty
  • Many financial decisions are emotional
  • It can be difficult to learn about financial products

Financial decisions are often made when we are not at our best place in terms of financial resilience. We are finding that more and more people are borrowing to meet everyday expenses like rent and food. As a responsible lender we have always been careful about doing our best to make sure that lending to someone does not have a detrimental effect on their finances. Lower value and short-term lending is sometimes a good way to support members get over financial bumps; but if we see that there is little change or improvement in their financial situation in recent months, we would be reluctant to add to their financial burden for the sake of a short term fix.

We know that members can find it difficult to accept that we can’t always lend to them, but being a responsible lender is in our DNA and we would never lend to someone if we felt it would have a negative effect on their financial well-being.

We regularly provide information to members about where to find financial help, debt management, budgeting tools and how to improve financial well-being.

Borrowing more is not always the best outcome for members. Better outcomes may be building up savings, tackling short-term financial problems and developing financial resilience.

Credit unions including Hoot have always looked after the financial well-being of members, so we have embraced the new Consumer Duty rules and will use them to support our members in achieving their financial goals.

Want to know more about Consumer Duty? CLICK HERE

10 May 2023

Author: David Batten, CEO
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