FCA warns firms just one month left before Consumer Duty comes into force
The UK Financial Conduct Authority (FCA) reminds firms that the Consumer Duty comes into force on 31 July for new and existing products and services that are open for sale or renewal.
The regulator says it is crucial that firms are asking themselves the right questions, to make sure they are on track and making the most of the remaining time.
The FCA expects boards, or equivalent management bodies, to have clear oversight of Consumer Duty implementation plans. By this stage they should have identified any potential gaps or weaknesses in the firm’s compliance and developed a plan to remedy this.
With just one month to go until the Consumer Duty deadline, the FCA is highlighting 10 questions that firms could ask themselves.
10 key questions for firms to consider:
- Are you satisfied your products and services are well designed to meet the needs of consumers in the target market, and perform as expected? What testing has been conducted?
- Do your products or services have features that could risk harm for groups of customers with characteristics of vulnerability? If so, what changes to the design of your products and services are you making?
- What action have you taken as a result of your fair value assessments, and how are you ensuring this action is effective in improving consumer outcomes?
- What data, MI and other intelligence are you using to monitor the fair value of your products and services on an ongoing basis?
- How are you testing the effectiveness of your communications? How are you acting on these results?
- How do you adapt your communications to meet the needs of customers with characteristics of vulnerability, and how do you know these adaptions are effective?
- What assessment have you made about whether your customer support is meeting the needs of customers with characteristics of vulnerability? What data, MI and customer feedback is being used to support this assessment?
- How have you satisfied yourself that the quality and availability of any post-sale support you have is as good as your pre-sale support?
- Do individuals throughout your firm – including those in control and support functions – understand their role and responsibility in delivering the Duty?
- Have you identified the key risks to your ability to deliver good outcomes to customers and put appropriate mitigants in place?
- The regulator notes that once the Duty is in force it will prioritise the most serious breaches and act swiftly and assertively where it finds evidence of harm or risk of harm to consumers.
Earlier in 2023, the FCA found that some firms are behind in their planning, so there is a risk that they may struggle to apply the Duty effectively once the rules come into force.
For instance, the regulator identified plans that gave little detail on who is leading the overall implementation programme and is responsible for it, or who is leading the various workstreams within the programme.
In some cases, there was more limited evidence that firms’ boards and committees had properly scrutinised and challenged plans. In one example, there was no evidence of engagement with the firm’s Chair or other non-executive directors, and the board only asked one question before approving the plan. In another example, board minutes showed that the plan was approved without discussion.
The Duty will include requirements for firms to:
- end rip-off charges and fees
- make it as easy to switch or cancel products as it was to take them out in the first place
- provide helpful and accessible customer support, not making people wait so long for an answer that they give up
- provide timely and clear information that people can understand about products and services so consumers can make good financial decisions, rather than burying key information in lengthy terms and conditions that few have the time to read
- provide products and services that are right for their customers
- focus on the real and diverse needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction.
The duty includes a new Consumer Principle that ‘a firm must act to deliver good outcomes for retail customers’.