With six months to go before the Consumer Duty Regulation comes into force, the Financial Conduct Authority (FCA) published the results of its review of firms’ implementation plans on 25 January 2023. Consumer Duty will set higher and clearer consumer protection standards across financial services and require firms to act to deliver good customer outcomes. Firms were required to submit implementation plans for the regulation in October 2022, with subsequent rules coming into force on 31 July 2023 for new and existing products or services that are open to sale or renewal and 31 July 2024 for closed products or services.
Consumer Duty is a hot topic in the industry, and we expect many of our members to be impacted. This month’s insight summarises the FCA’s findings from the review. The FCA has published the review findings to help firms understand its expectations and implement Consumer Duty more effectively.
The FCA’s review focused on larger “fixed” firms with a dedicated FCA Supervision team that primarily operate in retail financial services markets. It found that many firms show they understand and embrace the shift to delivering good customer outcomes, which the FCA intends the consumer duty to bring, and have established extensive programmes of work to comply with it properly. However, it also found that some firms are further behind in their planning, so there is a risk that they may struggle to apply the Duty effectively once the rules come into force
Over the remaining six months of this implementation period, the FCA wants firms to focus mainly on the following:
- Prioritising: Firms should make sure they are prioritising effectively, with a focus on the areas that will make the most significant impact on outcomes for consumers.
- Making the changes needed: The FCA urges firms to ensure they are making the necessary changes so consumers receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need when required.
- Working with other firms: Firms need to share information and work closely with their commercial partners to ensure they deliver good customer outcomes. The FCA has found that some firms need to accelerate this work to implement the Duty on time.
Leading up to the July 2023 deadline, the FCA will continue to engage with firms. The regulator plans to send out a survey to a sample of firms to help it understand the progress they are making in implementing the Consumer Duty. It will also be issuing letters to firms, highlighting its key expectations on implementing the Consumer Duty and some of the key risks and consumer harms it is concerned about. These letters were issued to firms in the below sectors on 3 February 2023, which we will recommend reading.
- Asset management, custody, and fund services and alternatives.
- Consumer investments.
- Credit reference agencies and credit information service providers.
- General insurance and pure protection.
- Life insurance.
- Mainstream consumer credit lending.
- Mortgage lending (including administration).
- Retail banks and building societies.