FCA sends Consumer Duty ‘Dear CEO’ letter to payments firms
The UK Financial Conduct Authority (FCA) has written to all payments firms, including Payment Institutions (PIs), Electronic Money Institutions (EMIs), and Registered Account Information Service Providers (RAISPs), to help them implement and embed the Consumer Duty effectively.
The letter set out the following:
A reminder of the implementation timeline
- April 2023: Manufacturers complete reviews and share information with distributors
- July 31, 2023: Duty applies to new and existing products open to sale or renewal
- July 31, 2024: Duty applies to closed products or services
How the Duty applies to payments firms
The Duty applies to products and services offered to retail customers, micro-enterprises, small charities with an annual turnover of less than 1 million GBP, and to all firms who determine or have a material influence over consumer outcomes.
Key elements of the Duty
The Duty requires firms to act in good faith towards customers and avoid causing foreseeable harm. It also introduces new rules and guidance to ensure products and services are designed to meet customer needs, provide fair value, communicate effectively, and provide ongoing support.
Firms must prioritise the interests of customers and consider how Consumer Duty applies to their business. They must monitor and take action to rectify poor customer outcomes.
New rules and guidance of the Duty target the following:
- Products and services: designed to meet the needs, characteristics and objectives of a specified target market (chapter 6).
- Price and value: products and services provide fair value with a reasonable relationship between the price consumers pay and the benefit they receive (chapter 7).
- Consumer understanding: firms communicate in a way that supports consumer understanding and equips consumers to make effective, timely and properly informed decisions (chapter 8).
- Consumer support: firms provide support that meets consumers’ needs throughout the life of the product or service (chapter 9).
Feedback from recent review of firms’ implementation plans
The FCA has reviewed implementation plans and identified three key areas that firms need to focus on during the second half of the implementation period (to 31 July 2023):
- Effective Prioritisation: to prioritise some implementation work, such as reducing the risk of poor consumer outcomes, ahead of other aspects.
- Embedding the substantive requirements: to carefully consider the Duty’s substantive requirements and for firms’ policies and processes to reflect these adequately.
- Working with other firms: to ensure timely implementation of the Duty and to work together with other firms in the distribution chain.
The FCA is clear on the Consumer Duty implementation being a priority with larger payments firms, which are expected to provide regular updates on their progress. However, all firms in the payments portfolio should be prepared for engagement with the FCA. An anonymised survey by an external research agency will be sent to a sample of firms to help the FCA understand the progress of firms in implementing the Consumer Duty and inform their ongoing communications.
How can Complyport help?
Here at Complyport we are supporting a number of firms in the identification and implementation of their Consumer Duty by:
- Assessing the impact of “The Duty” upon their business and working with the firm to identify how best to implement the required changes to their policies, procedures, training and compliance monitoring/assurance plans.
- Formulating road maps and key milestones for ensuring the implementation of “The Duty’s” framework in a timely and efficient manner within the firm.
- Providing an external review and verification of work done to date, to test that it has landed and embedded successfully and that the new processes and effective and fir for purpose.
- Provision of template documentation to assist firms in creating their policies around The Duty and Vulnerable Customers.
Please contact Jan Hagen for any questions and assistance regarding the Consumer Duty implementation plans via email at email@example.com to book in a free consultation.
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