A survey of 100 lenders by transaction analytics firm Fuse has revealed that 55% of lenders are not ready for the new regulations and 65% of lenders have not fully reviewed the new regulations.

A total of 61% also admitted that they will need to seek external expertise to meet regulatory requirements.

The FCA’s Consumer Duty, which comes into force at the end of July 2023, requires lenders to be able to ensure customers outcomes are being met. They must also provide evidence that vulnerable customers are achieving fair outcomes.

Despite the lack of preparation, the majority see Consumer Duty as a positive step on the road to better customer service, with more than three-quarters (77%) of lenders believing that the new rules are the first step in a long journey to improving borrower outcomes.

However, a clear majority also feel that the new rules are coming at too challenging a time as the cost-of-living crisis continues to bite. Nearly three-quarters (72%) of lenders believe that the regulatory change has come at a financially challenging time for their business and, despite the increasing need for credit, more than a fifth (22%) of lenders say the cost-of-living crisis has already reduced the number of loans provided.

‘Vast majority are unprepared’

Sho Sugihara, CEO and co-founder of Fuse, said: “Lenders are under huge pressure to bring in the much-needed changes the Consumer Duty demands but, less than two months out, it appears the vast majority are unprepared.

“Lenders need more support ahead of the Consumer Duty deadline. With the cost-of-living crisis contributing to a growing consumer reliance on credit, they are performing a critically important role in supporting millions struggling with rising costs.

“In the long term, the Consumer Duty needs to kickstart a transformation across finance to ensure it becomes more personalised and outcomes-driven for borrowers. In order to build a more effective and fairer financial system, lenders should supplement traditional affordability criteria with a more holistic view on whether a product will provide a consumer with good outcomes.”