Nearly two-thirds (65%) of UK lenders have stated that they are yet to fully review the regulation requirements for the new Consumer Duty, research by AI powered transaction analytics firm, Fuse, has found.

In addition to this, a further 61% of the 100 lenders surveyed have said that they will need to turn to external expertise to meet regulation requirements.

The Financial Conduct Authority’s (FCA) Consumer Duty will come into force at the end of July, and will require firms to not only act to deliver good consumer outcomes, but to understand and evidence whether those outcomes are being met. The rules will also ensure fair outcomes for vulnerable customers.

Although 77% of lenders believe that the new rules are the first step in a long journey to improving borrower standards, 55% admit that they are not ready to act on the new rules.

With a growing consumer reliance on credit – 58% of UK adults using a credit product in the last year and a fifth (21%) relying on credit and loans to pay for everyday expenses – 72% of lenders have stated that they believe that the regulatory change has come at a financially challenging time for their business. Despite the increasing need for credit, 22% of lenders have said that the cost of living crisis has already reduced the number of loans provided.

CEO and co-founder of Fuse, Sho Sugihara commented: “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.”

The insights come as Fuse has recently launched its new ‘Health Signals’ product, which is designed to help risk and compliance teams to measure vulnerability, predict arrears risk and monitor the future impact of financial products on their customers.

The ‘Health Signals’ platform can be integrated with an organisation’s current systems, using algorithms that have been trained on over 400 million proprietary data points collected specifically for retail lending, including transactions, lending decisions and credit reports.

Sugihara added: “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.”

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