The FCA has described their New Consumer Duty as "a paradigm shift in their expectations". They are raising the bar for customer care, and while some firms may already be meeting many of the expectations, many will need to make some significant changes in the coming year. Coming at a time when more and more customers are falling behind on payments, how will the new regulation transform the debt resolution industry? We caught up with Risk & Compliance Advisor Erik Porter.
Abi: Hello and welcome back to Break The Cycle. If you missed our last episode, go back and take a listen, we talked to Erik Porter about his views on the New Consumer Duty. This week, we dive back into that conversation to discuss how it’ll affect smaller businesses like Ophelos.
Hi Erik, welcome back. So in your opinion, what will the changes to consumer duty, look like, for Ophelos, and businesses that are similar?
Erik: I think it's really a story of two halves. Because the consumer duty is all about people and culture and approach and the DNA of an organization, in some respects Ophelos is already really ahead of the curve because Ophelos started from the position of being an ethical, different, innovative debt collection organization.
It's not just "we want to be another debt collection agency" and already started with having customer outcomes at the heart of everything that's done within Ophelos. So that's good. It means that there hasn't needed to be a process here of convincing the founders, the team and others that this is the right thing to do, or that this might need some mean commercial trade offs, you know, sacrificing income because we're doing the right thing for customers. That was already happening here, so that's good. Ophelos also has a slight advantage in that it's relatively new and has been authorized relatively recently, right? In the last couple of years, so a lot of the regulation that was already heading in this direction is, again, already embedded in the work that Ophelos does. And Ophelos is also involved in the FCAs Early Oversight Program. So there's a lot of close and continuous work with the FCA, so you're very well-wired into what the regulatory expectations are. So that's good.
The challenge Ophelos has is it does a lot of amazing things and delivers a lot of great outcomes for customers... in young organizations, sometimes the documentation and evidence of that is hard.
Abi: Simply because we are young?
Erik: Because of time, because of the number of people, because of pace. So when I talk to people around this organization and I say "okay, well how do you prove to me that people going through a digital collections journey that are vulnerable, get the right level of support? I always get an answer and I always get a very sensible answer. I get an answer that is backed up with data. Because again, the benefit of being a fintech is you measure everything, right? You know how long a person hovers over an article is something that can be measured, right? So you literally measure everything, but that creates a challenge - because you measure everything, it's taking those five indicators, five statistics out of all of that measurement and saying right, which ones of those do I use to evidence this part of compliance with a consumer duty or something else. And so the implementation plan for Ophelos looks a lot like building more evidence, building more documentation, and then taking that into enhanced governance forums where the right people are at the table to sit around and talk about "what's the data telling us?", "what changes might we need to make as a result of this data?", highlighting areas where harm is occurring, or helping us sleep better at night knowing that actually what we're doing is not causing that harm. So it's a really practical, lots of action-based activity for Ophelos, versus some organizations out there right now that I can imagine, not imagine, I've seen it, the people charged with implementing the change in those organizations are trying to convince founders, CEOs, senior managers, whoever it is, that this is the right thing to do. And even just getting that through their heads is an uphill battle before you even get onto the practical stuff that we need to do.
Abi: Let's just talk a bit about the timing of the New Consumer Duty, it's come at a time when more and more customers are falling into debt. What are your thoughts on that?
Erik: Yeah, timing's a big industry debate at the moment. There are a lot of people who are saying, and you mentioned earlier, the timeline for implementation is quite aggressive. A lot of people are saying "actually, shouldn't we be really focusing and concentrating on the cost of living crisis and all of the challenges that that's presenting for consumers before we start introducing lots of new regulation?". And there are a few schools of thought out there.
My view is I think we do need to do both. And I think it's one of those things we should recognize that this cost of living situation is not going to go away quickly. It's not gonna be resolved in two months or three months, or maybe even two years. And so the faster we can get to a position of being comfortable that we're delivering good outcomes, that has to benefit everyone.
And it's kind of a good time to implement, even though yes, it takes a lot of extra time and resource and maybe some attention away from other things, it's a good time to get that because the opportunity for harm is greater in these situations, like with the cost of living. So implementing now gives us a good time to test some of these things, we will get immediate feedback as to what's working and what's not working and then, if there can ever come a good legacy out of a cost of living crisis - and we think about legacies, COVID was a terrible time, but actually Covid left us with some really positive lessons when we think about wellbeing and remote working and some of the other things that came out of that -, let's find the good in a cost of living crisis.
And actually this can be part of that legacy, so that we're a little bit prepared for the next time because as we all know, this is cyclical - 10 years from now, we'll be sitting here having a conversation again about another cost of living crisis. So let's do the right thing now.
Abi: Great. Well, see you in 10 years! Thanks so much for joining us.
Erik: I hope to, not in 10 years, but if I'm here in 10 years then I've not done a very good job of planning, but maybe I will join your podcast in 10 years from a beach somewhere. Thanks for having me, Abi.
Abi: Thanks so much.