Consumer Duty Countdown – A Reminder for Firms

The deadline for the FCA’s new Consumer Duty regulation is now just over a month away. On 31 July, the new set of rules will apply to new and existing products and services that are open to sale or renewal and aims to set “higher and clearer standards of consumer protection” across all financial sectors, including insurance. As we rapidly enter the final stages, firms should be working to ensure they are ready to meet the requirements laid out in the FCA’s guidelines. Let us give ourselves a brief reminder of these new rules.

The Consumer Duty covers three core elements:

1. A Consumer Principle, in which “firms must act to deliver good outcomes to retail customers.” This will be the twelfth principle under the FCA’s Principles for Businesses.
2. Cross-cutting rules, which set out how firms should act to deliver good outcomes, requiring firms to:
3. Act in good faith toward retail customers.
4. Avoid causing foreseeable harm to retail customers.
5. Enable and support retail customers to pursue their financial objectives.
6. Four Outcomes, which set out detailed expectations that represent key elements of the firm-consumer relationship:
   1. Governance of products and services
   2. Price and value
   3. Consumer understanding
   4. Consumer support

We have covered each of these elements extensively in previous articles over the past year. To go back and view these topics in more depth, click here.

To help firms prepare, the FCA has also released 10 key questions for firms to consider in the lead up to the implementation deadline:

1. 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?
2. 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?
3. 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?
4. What data, MI and other intelligence are you using to monitor the fair value of your products and services on an ongoing basis?
5. How are you testing the effectiveness of your communications? How are you acting on these results?
6. 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?
7. 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?
8. 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?
9. Do individuals throughout your firm – including those in control and support functions – understand their role and responsibility in delivering the Duty?
10. Have you identified the key risks to your ability to deliver good outcomes to customers and put appropriate mitigants in place?

The FCA expects these changes to be driven from the top and will be holding firms, including senior managers and boards, accountable for the delivery of good consumer outcomes. For many firms, the focus on consumer outcomes may require cultural changes to embed customer’s interest throughout organisational strategies, leadership & policies.

Whilst the majority of firms are on course to implement the rules on time, the FCA has concerns that there are some that still have work to do, and has warned that it will act “swiftly and assertively” on the most serious breaches where there is significant evidence of harm or risk of harm to consumers. 

The questions above should help firms to identify gaps in their implementation plans or any areas they can improve upon. In addition to these, users of the Development Zone can also find a range of Consumer Duty courses in their course catalogue, including:

• Consumer Duty – An Introduction
• Consumer Harm: Identification, Prevention, and the Consumer Duty
• Customer Service: The Channels of Communication

For those not currently using the system, you can find out more and request a free 14-day trial here: https://mydevelopment.zone/#getStarted