Financial Conduct Authority’s (FCA) Consumer Duty

Summary of expectations for mortgage intermediaries in relation to the Financial Conduct Authority’s (FCA) Consumer Duty

The FCA’s new Consumer Duty rules and guidance will be introduced on Monday 31 July 2023 for new and existing products or services that are open to sale or renewal (and to closed products or services on Wednesday 31 July 2024).

The purpose of this document is to set out at a high level the expectations Halifax Intermediaries has for mortgage intermediaries who have contact with our mortgage applicants and customers or have a material influence over the outcomes they receive, in relation to Consumer Duty.

Scope and Application

Consumer Duty applies across the distribution chain, from product and service origination through to distribution and post-sale activities. All FCA regulated firms including mortgage intermediaries who are involved in the manufacture, provision, sale and ongoing administration and management of a product or service to a retail customer are within scope of Consumer Duty, if they have a material influence over, or determine, retail customer outcomes (please note the definition of Retail Customer within the FCA’s Consumer Duty final rules (PDF, 1.3MB) (section 2A.1 – application and purpose).

Consumer Duty and High-Level Expectations

We expect our mortgage intermediaries to adhere to our policies and procedures and all relevant regulatory requirements, including the FCA’s Consumer Duty rules (PDF, 1.3MB) and non-handbook guidance (PDF, 1.1MB).

In particular we would expect mortgage intermediaries to comply with the following Consumer Duty rules:

• Consumer Principle and Cross-Cutting Rules
• Consumer Understanding
• Consumer Support
• Colleague Capability and Training
• Product Distribution.

The FCA sets out clear and specific requirements in relation to the distribution chain of products and services which apply to Halifax Intermediaries as product manufacturer and to mortgage intermediaries as distributors.

A mortgage intermediary must obtain information from the manufacturer about the product such as a high-level summary of the benefits to the target market, information on overall prices or fees and confirmation that the manufacturer considers that total benefits are proportionate to the total costs. It must also ensure that its own fees and charges offer fair value, and that payment of these does not result in the product or service ceasing to be fair value overall.

To fulfil obligations, we will provide mortgage intermediaries who distribute Halifax Intermediaries products with a ‘product and customer fair value statement’ by the end of April 2023, which will provide the relevant product and fair value information to allow you to comply with your responsibilities under PRIN 2A.3.16 R and PRIN 2A.4.16 R. This will be made available to you on the Halifax Intermediaries website.

Monitoring Outcomes

In line with the FCA’s final Consumer Duty rules (PDF, 1.3MB) (2A.3.18R) we expect mortgage intermediaries to provide us with any relevant sales and management information we request, to demonstrate that our products are being distributed correctly with consideration of customer outcomes. MI may include relevant sales information:

• Complaints and root cause analysis data
• Evidence of adherence to the defined target market
• Other customer outcomes related data (e.g. customer sentiment data)
• Customer understanding
• Your treatment of vulnerable customers.

Customers in Vulnerable Circumstances

There is a broad range of guidance and regulation impacting firms that deal with customers in vulnerable circumstances, including and not limited to Consumer Duty, the FCA Guidance (PDF, 647KB) for firms on the fair treatment of vulnerable customers, MCOB, CONC, CMCOB, BCOBS, and Equality Act 2010.

The FCA definition of vulnerability is that – “A vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”.

Mortgage intermediaries should have proportionate policies and procedures in place in relation to customers in vulnerable circumstances. As an example, we would expect you to:

• Have a policy outlining how you support customers in vulnerable circumstances.
• Ensure that relevant staffs receive ongoing training on recognising and supporting customers with characteristics of vulnerability.
• Have procedures and processes in place that allow customers to share and record support needs with you and that permit you to share this with us where a customer has consented to this. We will shortly provide details of how you can share additional support needs of your clients with us after completion of the mortgage.
• Inform the customer that they can share any additional support needs with us directly, once they become a Halifax Intermediaries customer after completion of the mortgage.

Contracts and Terms of Business

Your terms of business agreement with us require you to comply with all applicable laws and regulations including the Consumer Duty rules and guidance. As part of the process to implement Consumer Duty, we may also make updates to the terms of business agreements to reflect the evolving requirements of the Duty. If this applies to you then we will notify you of these changes and the timescales that apply.

Non-Compliance with Regulatory Expectations

If there are any material differences between the expectations set out within this statement in respect of your compliance with the Consumer Duty rules and guidance, and your policies, procedures, and controls, these should be notified promptly to us via your business contact. We will work with you in the first instance to remedy any issues. However, in line with the FCA’s final rules (2A.9.17), Halifax Intermediaries has a duty to inform the FCA if it becomes aware of any other firm in the distribution chain not complying with Consumer Duty.