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So what we have with Consumer Duty amounts to what could, in time, be a terminal combination for some lenders: more wide ranging compliance require- ments that require the lenders to act at all times for the ‘good’ of the borrower, and a still very permissive compensa- tion regime. This, during a period of rising interest rates and escalating consumer stress, is not good news. With this in mind, lenders are going to need to be very clear and confident about the quality of their back-office decision making. If they are not, they have less than a year to put in place something that can straightforwardly evidence they have made every reason- able effort to meet the requirements of Consumer Duty. There will undoubtedly be those lenders who sleepwalk into trouble, carrying on as they were, in the hope that they can take on board the new rules without any risk to their viability, and reluctant to make the necessary investments in management resource. They will have no one to blame but themselves if they are targeted by claims chasing companies, which have proved to be very good at focusing their attention on businesses that they know
find it problematic evidencing quality compliance. Culpability will reside in the boardroom and nowhere else, because there is ‘plug-and-play’ technology available to ensure compliance to Consumer Duty. We all know how assisted underwriting technology can ensure rapid, optimal outcomes for both the lender and the borrower. Platforms such as Lending- Metrics’ Auto Decision Platform (ADP) have been quietly working in the back- ground for some years, using real-time data to generate the right decisions from both the consumer and credit risk perspective. There will not be so many, however, who appreciate that they have a welcome extra benefit. Finance providers no longer have to rely on patchy due dili- gence documentation - often amount- ing only to a disparate mix of proofs - when trying to remain compliant. Such platforms provide a robust deci- sion-making process, much less sus- ceptible to human error, that generates a digital audit trail able to stand up to the most intense scrutiny. All of the data elements that go towards making every decision are stored and a full audit kept of how they are used. The lender has a policy signed off by
their compliance team, which is in line with the latest regulations, and it is dili- gently enforced by technology. Decision making is 100% consistent and backed- up by a digital footprint. So, if a mis-sell- ing claim is made, a lender has a quickly generated justification for its decision to present in its defence to a regulator. Consumer Duty is yet another big step away from caveat emptor, or buyer beware, towards a ‘seller beware’ regime, where providers that fail to have a 360-degree view of the applicant, pay a penalty. This direction of travel is going to make platforms such as ADP indispensable for those that want to remain in busi- ness and profitable.
Above: LendingMetrics' Commercial Director David Wylie
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Metrics Monthly | 09
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