How Will The FCA Consumer Duty Rules Affect Firms Applying For Authorisation?

As we are all aware, the FCA’s Consumer Duty rules have now landed and are very much with us.  It is not an overstatement to describe it as a ‘game changer’ – perhaps the most significant change to the regulation of the retail financial services market since the introduction of RDR a decade ago.

The message for those authorised firms that will be impacted by the introduction of the Consumer Duty rules is very much one of ‘don’t delay, start now’. The need to have implementation plans in place by the end of October will be focusing minds and pushing this up the agenda in boardrooms throughout the country. But spare a thought for firms currently preparing applications for FCA authorisation.

Firms that submit their applications to FCA in the coming weeks will likely not have decisions made on their applications until early 2023, but for them the FCA says that the need to demonstrate that they can and will continue to measure up to FCA’s requirements here will apply ‘from now on’.

The new rules will require firms to consider every step of the customer journey throughout the lifecycle of the product, including design, communications, and customer service to assess any areas which may harm customers.

What the new rules will require firms to do

  • 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
  • Internal governance will need to be reviewed. Customer outcomes will need to be tracked. Customer service processes may need to be reassessed, and firms should review their complaints handling processes to ensure issues and trends are identified and reported with product changes effected quickly if necessary.

PS22/9 Consumer Duty rules implications for firms seeking FCA Authorisation

 For firms applying to the FCA these changes will mean some extra thought, planning and work will need to be put into their applications (including firms applying to vary their permission). This has the potential to present a significant challenge to firms still giving thought to how exactly they will run their businesses.

Based on the expectations that FCA has set out they will now want to see details of the firm’s Consumer Duty obligations woven throughout applications made to them. Examples here will include (but not be limited to):

  • Evidence of a scoping exercise which demonstrates that an applicant firm has a clear understanding as to how the Consumer Duty will apply to its products and services.
  • A comprehensive plan setting out how the firm will act to deliver good outcomes for its retail customers – supporting and empowering these customers to make effective decisions and avoiding foreseeable harms at every stage.
  • Details of how the firm will deliver on the four outcomes: Communications, Products and Services, Customer Service, Price and Value.
  • Details of the governance arrangements that will ensure that the firm meets its obligations on a continuing basis: appointment of a Duty Champion, ongoing monitoring – eg the types of management information that will show how firms measure their attainment of the outcome.

How Complyport can help

Compliance assistance can be invaluable to a firm setting out on the road to regulation, especially against a dynamic backdrop of ever-updated expectations and requirements.

Additionally, achieving the goal of FCA authorisation is not the end of the story – if anything it instead marks the end of the beginning.  Once authorised, firms must continue to meet the FCA’s standards and rules and achieve good outcomes.

Complyport is a market leader in FCA authorisations and have successfully assisting in over 1000 applications. Over the last 20 years, we have provided guidance and advice on permissions required, outlined the amount of regulatory capital the new firm will need and project managed the building of the application pack.

Once a firm is successfully authorised, Complyport’s expert consultants assist firms in remaining compliant with regulation as well as advise them on how to meet and adapt for upcoming regulatory change. We are currently providing regulatory support to over 600 regulated firms on an ongoing basis globally.

Click here to learn more about Complyport’s FCA authorisation support and to book a free consultation meeting.

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.

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. Complyport can also assist firms by providing personnel to cover all the key compliance functions including resourcing individuals to be registered as your Compliance Oversight Function (SMF16) and/or Money-Laundering Reporting Officer (SMF17).

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