The consultation is open until 15^th February 2022, with responses to be submitted either via the FCA website or emailing CP21-36@fca.org.uk.

CP21/36 – A New Consumer Duty – Parties who should take note

• Regulated firms, including electronic money institutions, payment institutions and registered account information service providers;
• Consumer organisations and individual consumers;
• Industry groups/trade bodies;
• Policy makers and regulatory bodies;
• Industry experts and commentators, and;
• Academics and think tanks.

Aims of CP21/36

The New Consumer Duty is seeking to build on the FCA’s 2021/22 Business Plan by actively protecting consumers, with all five objectives within the plan having a consumer benefit. The FCA is seeking to develop a fairer, more consumer-focused industry environment, and to level the playing field by:

• Consistently placing consumers interests at the centre of business and aligning focus on delivering good outcomes for consumers;
• Developing competition that will provide market-wide benefits, with consumers being attracted and attained by high-standards, and;
• Consumer products become more transparent, being fit for purpose, and provide value, allowing consumers to make informed decisions.

These aims are looking to re-align the industry with the consumer objectives of the FCA, whilst also protecting the consumers from harm. Results from the Financial Lives Survey 2020 showed that only 42% of adults had confidence in the UK Financial Services Industry, with only 35% agreeing that Financial Firms are honest and transparent, highlighting the need to address these areas and improve consumer outlook.

Proposed Changes

The FCA has given a detailed breakdown of the proposed changes it would like to develop, with potential to add to the FCA handbook. These can be found in Annex 1 and 2 of CP21/36. The most notable development that the FCA is looking to implement is the introduction of a 12^th Principle, a new Consumer Duty principle, namely:

• A firm must act to deliver good outcomes for retail customers.

This principle will cut across multiple elements of firms’ operations and will help the FCA to deliver the aims that are set out above. The FCA is demanding higher expectations of care from firms in relation to consumer outcomes. This development aligns with the FCA’s move to be more assertive, innovative, and adaptable with their regulatory approach. Under the new Consumer Duty proposition, the FCA would expect firms and supervisors to be increasingly focused on the outcomes for consumers and their experiences. Firms would need to assess and be able to evidence to whom and how they are providing good outcomes for consumers, evidencing the new data-led approach the FCA has developed.

How can Complyport Help with CP21/36

Being at the forefront of compliance and regulation, Complyport can assist firms in meeting their responsibilities under the FCA’s consumer duty requirements. Depending on your firm’s progress in this space, Complyport can provide a health check on your firm’s consumer duty principles and their effectiveness. Within this we would look at your firm’s products, how they are marketed to and accessed by your customers and your complaints handling procedures, root cause analysis and remedial action plans.

Following this assessment, our experienced compliance consultants can help your company put in place the right policies and procedures to ensure you are meeting the on-going consumer duty requirements. Additionally, our team can review your staff’s skills and capabilities when it comes to consumer duty, vulnerable customers management, Treating Customers Fairly (TCF) and staff conduct to highlight any knowledge or skill gaps so as to implement & deliver a suitable training plan.

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.

The post FCA Consultation CP21/36: A New Consumer Duty first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

Handling and prioritising complaints

Firms should not take the current situation as an opportunity to delay unnecessarily or to not deal at all with complaints and they should take all reasonable steps to ensure that complaints can be dealt with by staff members working from home, where this can be done fairly and adequately.

Where firms have a reduced capacity to handle complaints, the FCA expects firms to prioritise:

• Prompt paying of complainants who have accepted redress offers
• the efficient and fair handling of complaints coming from:
  1. consumers who are likely to be vulnerable to harm if the complaint is not resolved
  2. micro-enterprises and small firms who are likely to have serious financial problems
• sending timely holding communications to complainants in 2 above where their complaints cannot be resolved within the required timescales.

Where a firm is not able to deliver these three priorities adequately and effectively through working from home, the FCA advises firms to maintain the physical presence onsite needed to carry out the necessary complaint handling processes. Social distancing onsite, therefore, should apply for as long as the government guidelines insist.

Vulnerable consumers

It is important to note that the coronavirus outbreak is likely to intensify personal circumstances that can cause vulnerability and, indeed, can cause some individuals who might not ordinarily be deemed to be vulnerable to become vulnerable. Such cases include the:

• loss of income from losing employment or being furloughed,
• the impact of isolation on mental and physical health, and people’s ability to work and care for others,
• increasingly demanding working conditions and greater exposure to the virus itself, especially for key workers.

This should not just apply to individuals, as it is possible that small businesses can also face circumstances that can make them vulnerable to harm especially if a firm fails to handle complaints promptly and fairly.

Maintaining the quality of complaint handling

Whilst it may take longer to review complaints when working remotely, the FCA does not expect any reduction in the quality of firms’ complaint handling procedures. Firms should continue to meet the relevant obligations, including investigating complaints competently, diligently and impartially, and paying appropriate compensation or making other necessary remediation.

The current circumstances should not prevent firms from:

• informing consumers about their complaint procedures and those of the Financial Ombudsman Service
• enabling consumers to submit complaints (although firms might need to limit more resource-intensive complaints channels to customers who cannot use other channels)
• acknowledging receipt of complaints, especially where the firms have the technology required to generate automatic responses by email or through online submission of complaints.

Firms facing difficulties

As complaint handling may take longer than normal, it is acknowledged that some firms might be unable to meet the timescale requirement set in DISP 1.6. Particularly, the requirement to provide a final response to complainants (generally within 8 weeks of receipt, less for some business types), or to provide a timely explanation why they are unable to provide a final response.

Firms facing difficulties to meet those requirements are encouraged to inform their usual supervisory contact or contact firm.queries@fca.org.uk, conveying the steps they are taking to manage and address the non-compliance.

It is important to note that, whilst the FCA acknowledges that some firms may struggle at this time in meeting their regulatory obligations, these firms are likely to be those that receive large volumes of complaints.  Complyport would expect that, in the majority of cases, firms that only deal with a small number of complaints are unlikely to be materially affected by the Covid-19 disruption and, therefore, should be expected to handle complaints in the normal way.

Claims management companies (CMC) and referrals to the Financial Ombudsman Service (FOS)

Based on the current operational challenges that firms face, the FCA expects CMCs to allow firms a reasonable amount of extra time, beyond 8 weeks, to give a final response before referring complaints to the FOS . unless there is any particular urgency in the individual complaint or the situation of the complainant.

Similarly, the FOS is expected to take current circumstances into consideration and may return a complaint to the CMC and ask the firm to communicate with the CMC directly to discuss and resolve the complaint. Professional cooperation between CMCs and the FOS will also ensure that the latter can focus on resolving complaints referred by vulnerable customers.

Additionally, CMCs are required to take these circumstances into consideration when dealing with their clients.  In particular, CMCs should keep clients updated on their complaints and relevant developments as per CMCOB 6.1.9 and they should consider the client’s specific circumstances when collecting fees.

The FCA is also encouraging CMCs to take account of the current circumstances when submitting Data Subject Access Requests as firms may have difficulties in responding within the defined timeframes. Therefore, CMCs should communicate with firms to understand those problems, consider guidance from the Information Commissioner’s Office (ICO) and, where issues cannot be resolved with firms, speak to the ICO directly before making complaints to it about those firms.

The Financial Ombudsman Service’s general approach

The FCA expects the FOS to take is guidance in the current environment into account when considering a firm’s compliance with the complaint handling rules.

PPI complaints

The considerations outlined by the FCA apply to all complaint including those relating to PPI.  The FCA reminds CMCs of the Dear CEO letter on PPI complaints. The letter still reflects the FCA’s and the Ombudsman Service views.

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How we can help: Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact:

Jan Hagen – jan.hagen@complyport.co.uk

The post How Financial Services Firms Should Handle Complaints During Covid-19 first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .