FCA Consumer Duty rules provide stronger focus on what consumers need to make good financial decisions
The introduction of the new FCA consumer duty rules will ensure financial services firms recognise the impact their services and products have on the consumer and provide a safeguard from exploitation.
The FCA has now published its much-anticipated Policy Statement and Final Guidance setting out its expectations in respect to Consumer Duty, intended to fundamentally improve how firms serve their customers.
In its press release accompanying these publications the FCA has said that 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 new rules will further require firms to focus on supporting and empowering their customers enabling them to make good financial decisions and avoid foreseeable harm at every stage of their relationship. Firms will have to communicate their service(s) to consumers in a manner that is easier to understand, tailor their product(s) and service(s) to ensure they meet their consumers expectations, and provide satisfactory customer support and assistance when and where needed.
The FCA announced that it will use assertive supervision and its new data-led approach to intervene quickly when it identifies practices which do not deliver for consumers. It is hoped the successful implementation of the policy will ‘purge’ competitor firms that drive down standards, and eventually lead to growth based on high standards for firms that are based and operating in the UK.
How will this policy impact firms and their senior managers?
- A stronger focus on customers’ interest will be expected from firms, and the new Consumer Duty Policy should be taken into consideration within organisational, and processing levels, with proposed changes to SMCR rules in order to enhance and preserve accountability within the firms. Senior managers will have a duty to deliver the expected outcomes to the consumer (based on their respected areas of responsibility), aligned with the SMCR Duty of Responsibility and the Conduct Rules. The FCA also suggests that a champion is placed at board level, who will arrange for the Duty to be discussed on a regular basis.
- Firms will be expected to ‘get it right the first time’, with greater emphasis to be placed from the FCA on the considerations of the firm in regards to the needs, characteristics, and objectives of their customers, and if the customer journey meets the required expectations and outcomes.
- The responsibilities and expectations should be clearly stated and articulated by firms, which should scrutinise their own behaviours, policies, and processes to make sure these desired outcomes are met.
- Monitoring, testing, and adaptation of firms’ policies and processes should be made on a continued basis in order to make sure the expected outcomes are effectively delivered. The firm should also be prepared to be able to provide robust explanations and details to the FCA on how it meets and discharges it’s consumer duty responsibilities should this become necessary.
- The exercise of Consumer Duty by firms will create waves in the retail market as more firms fall in line with FCA’s expectations – especially firms which need significant upgrades to their current processes.
The proposal of the Consumer Duty falls in line with FCA’s objectives of consumer protection, competition, and equality and diversity considerations. The regulator wants to raise their regulatory standards and scrutinise firms’ duty of care to their consumer.
Firms will be given 12 months from the FCA to implement these new rules on all their existing as well as new products and services. An additional extension of 12 months will be given to closed book products and services, in order for firms to have adequate time to upgrade and update these older products and services in line with the new standards.
Setting higher standards, being outcome-focused, and putting consumers requirements first, is central to FCA’s new strategy and expectations, which were underlined in their recent Strategy document release. The new Consumer Duty is the “cornerstone of this strategy”, and its implementation will compliment innovation, and bring competition within the UK financial sector within international, and high standards.
How can Complyport Help firms meet the new Consumer Duty rules?
Being at the forefront of compliance and regulation, Complyport can assist firms in meeting their responsibilities under the FCA’s Consumer Duty requirements. No matter where your firm is in the process already, we can help. Our services range from:
- an initial gap analysis of needs,
- the integration of Consumer Duty into your SMCR programme,
- drafting/editing policies and procedures,
- ensuring a joined-up approach of all other related policies and compliance obligations, such as:
- complaints handling
- financial promotions
- vulnerable customer management
- data protection
- financial crime (yes, financial crime – contact us if you want to know how consumer duty and financial crime are intrinsically linked) or
- providing training to your staff or board.
Whatever your needs, we have the skills, knowledge and resources available to help.
If you are interested in how we can support you with consumer duty compliance, please contact Jan Hagen via jan.hagen@complyport.co.uk.
About Complyport
Complyport is the City’s market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.
Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor.
We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.
Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers.
Day to day, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Our clients tell us we live our values; we are driven, agile and collaborative.
