By Neil Davies, Product Consultant at Welcom Digital

I recently attended the Finance & Leasing Association’s Annual Regulation Conference, which brought together regulators, legal experts and industry specialists to discuss the changing regulatory landscape across consumer and motor finance.

The reform of the Consumer Credit Act 1974 (CCA) was central to the conference and across the two-day conference, one message came through consistently: the industry is moving away from prescriptive, process-led compliance and towards a more outcomes-focused approach.

For lenders, it will no longer be enough to demonstrate that the correct form was issued or the required process was followed. Firms will be required to evidence that customers understood the information they received, were treated appropriately throughout the credit lifecycle and ultimately experienced a good outcome.

This represents a significant change in mindset, but it also creates an opportunity to rethink how products, processes and technology support customers.

From following rules to evidencing outcomes

While the CCA has served the credit market well for over 50 years, its prescriptive rules were designed for a very different environment, with consumer habits and market behaviours continuously evolving at a rate that the Act and its amendments cannot keep up with.

As the market, technology, and customer behaviour continue to evolve, the current framework can make it difficult for firms to adapt their customer journeys or introduce new strategies to manage their customers. The direction of travel is therefore towards a more flexible, outcome-based models, placing greater responsibility on firms to determine what good looks like and demonstrate how they are achieving it.

This does not mean regulation without rules, with some parts of the CCA remaining in place as prescriptive legislation as important statutory protections, and the Financial Conduct Authority will continue to publish details about their expectations and guidance. However, firms are likely to have greater freedom in how they meet those expectations, accompanied by greater responsibility and accountability for the results.

That balance will be crucial. Prescriptive rules provide certainty but can restrict innovation, while outcomes-based regulation offers flexibility but can introduce uncertainty. Firms will need clear governance, reliable evidence and a consistent framework for making and documenting decisions.

Moving from monitoring to meaningful outcomes testing

Management information and operational metrics remain important, but data alone does not confirm that a customer received a good outcome.

Firms need to test the customer journey from the customer’s perspective, rather than viewing it solely as a series of internal business processes. This means defining what a good outcome looks like, establishing appropriate thresholds and examining how different groups of customers experience each stage of the credit lifecycle.

That testing should consider onboarding, account management, arrears and complaints, as well as important factors such as vulnerability, communication needs, and individual circumstances.

Effective outcomes testing should combine regular monitoring with targeted, in-depth reviews. It should help firms distinguish between good outcomes, outcomes that could be improved and situations in which customer harm may have occurred.

Crucially, the insight must lead to action. The purpose is not simply to produce more reports, but to identify emerging risks, improve journeys, and demonstrate that appropriate changes have been made.

Clearer communication, tailored to the customer

Another important theme was the need to rethink customer communications.

The question is changing from “Did we send the correct document?” to “Did the customer understand what we sent?”

Customers should be given information in plain English, through a channel that works for them and with an appropriate level of detail. Digital communication may be the preferred option for many people, but it will not be suitable for everyone. Firms must retain appropriate choice and consider factors such as language, accessibility, vulnerability, and digital confidence.

Rather than overwhelming customers with lengthy standard documents, lenders can present the most important information clearly and provide straightforward routes to further detail. Worked examples can also help customers understand costs, rates, and the practical consequences of the agreement.

This approach needs to extend throughout the credit lifecycle, not just at the point of application.

Better collaboration across the distribution chain

Good customer outcomes are not the responsibility of one organisation acting in isolation. Brokers and lenders both influence the customer’s experience and need to work together effectively.

A lender may design the product, but a broker often controls which customer accesses it and what information is gathered during the initial journey. Clear allocation of responsibilities and the appropriate sharing of information are therefore vital for a seamless experience for consumers.

For example, if a customer discloses a vulnerability to a broker, that information should be managed sensitively and passed to the lender where it is appropriate and lawful to do so. The customer should not have to repeat their circumstances unnecessarily at each stage of the journey.

A genuine partnership between brokers and lenders can support more appropriate underwriting, clearer communications and better ongoing customer support. The objective should be a connected distribution chain, rather than a fragmented customer experience.

AI offers opportunity, but accountability remains with firms

Artificial intelligence was another major theme. AI is already being used across financial services for analytics, customer support, underwriting, product design and credit risk. Its use is likely to expand considerably over the coming years and move into all aspects of a business.

The potential benefits are clear, AI can automate routine activity, analyse large volumes of information and help firms identify trends or risks more quickly. It may also help customers compare products and understand complex information to help them find the right credit product for them.

However, firms must be able to explain where AI is being used, what purpose it serves and how its outputs are monitored. Senior managers remain accountable for decisions and customer outcomes, even when technology supports or automates part of the process.

Good governance will require clear guardrails, transparency, appropriate human oversight and documented evidence of how an AI-enabled process benefits customers. Firms must also consider resilience, fraud and the risk of customers placing too much reliance on automated recommendations.

Complaints and redress will depend increasingly on evidence

The discussions around Financial Ombudsman Service reform reinforced the importance of maintaining reliable information throughout the customer relationship.

Providing comprehensive evidence at the start of a complaint can help issues be reviewed and resolved more efficiently. Firms should therefore consider whether their systems capture not only what happened, but also why a decision was made and how the customer’s circumstances were considered.

This requires a joined-up approach of data capture, documentation and retention. Evidence should be proportionate, accessible, and capable of demonstrating the customer’s experience across the full credit lifecycle.

Strong records will become particularly important as regulation becomes more outcome focused. Firms will be expected to show that their approach worked in practice, rather than simply pointing to a policy or prescribed process that was contained in the regulations.

Technology has a central role to play

The regulatory changes ahead should not be viewed solely as a compliance exercise. They create an opportunity for firms to modernise their processes, improve communications and build customer journeys that respond more effectively to individual needs.

Flexible technology can help firms:

• map and monitor end-to-end customer journeys;
• collect consistent, relevant information;
• tailor communications and channels;
• identify vulnerability and emerging customer harm;
• document decisions and their rationale;
• support collaboration between lenders and brokers; and
• produce evidence that customer outcomes are being achieved.

However, technology alone is not the answer: It must be supported by clear ownership, strong governance and a culture that considers the effect of each decision on the customer.

Preparing for the change ahead

The conference made it clear that firms should start preparing now. Reform will take time to develop and implement, but lenders can already assess whether their current systems, data and governance arrangements are suitable for a more outcomes-based environment.

The key questions are no longer simply whether Consumer Duty has been implemented or whether the required process was followed. Firms now need to ask: How do we know it is working, and can we prove it?

Those that begin answering these questions now will be better placed to respond to regulatory reform, maintain the confidence of customers and funders, and take advantage of future opportunities for growth and innovation.

At Welcom Digital, we continue to consider how technology can help lenders respond to these changing expectations by creating more flexible journeys, improving access to meaningful data and supporting better, more demonstrable customer outcomes.