Consumer Duty: Not a “Once and Done” Exercise

Nisha Arora, the FCA's Director of Cross-Cutting Policy and Strategy recently gave a speech highlighting three months since the Duty came into force. The regulator has stressed that the Duty is not something where firms can “tick the Consumer Duty box on a to-do list and move on”, but rather something that needs to become part of “who you are as a firm, your culture, and how you do business”, from Board to front-line delivery, and from product design to communications and customer support.

The FCA want to see firms learning and improving continuously. If firms have not looked in detail at their customers’ experience and are not monitoring outcomes for customers - including different groups - on an ongoing basis, the FCA will see this as an indication that firms have not gotten to grips with the Duty.

Firms will need to demonstrate to the FCA that they are delivering good consumer outcomes. This will include firms’ implementation plans, data and monitoring, internal assessments, and how firms are preparing for the closed products deadline of 31st July 2024.

As set out in the FCA rules, firms’ Boards, or equivalent governing bodies, must review and approve at least once a year an assessment of whether they are delivering good outcomes for their customers. The assessment should include the results of the monitoring on whether the firm’s products and services are delivering expected outcomes in line with the Duty and include any evidence of poor outcomes. Before signing off, firms’ Boards need to agree on the actions required to address any identified risks or poor outcomes and agree on whether any changes to the firm’s future business strategy are required.

Delivering better outcomes for consumers can be highly beneficial for all parties, not just the consumers. It sets a higher standard, promoting healthier competition within the industry and improving trust, as well as supporting growth and innovation within the wider market. The FCA has already seen examples of delivering better outcomes in practice, including:

• Firms simplifying language in their communications to consumers and expanding into more accessible formats within their existing communication channels
• Firms being more upfront on their websites about policy exclusions, making it easier for customers to understand whether a product meets their needs.
• And firms reviewing their fees with fair value in mind.

These steps have proven to be effective in meeting the requirements under the Duty. Firms that are already embracing these practices are already seeing a positive shift in culture, but there is still more that can be done.

Over the coming months, the FCA will continue to work across all sectors to test firms’ implementation and embedding of the Duty and will share good practices to support the industry. A webinar hosted by the regulator will also be held on 6 December from 10am until 11:30am to help firms to better understand expectations under the Duty.

Register for the webinar here.