Consumer Duty

Consumer Duty
 
The Financial Conduct Authority FCA published final rules for the Consumer Duty along with key timescales in July 2022.  To allow firms to understand how they are required to implement the new rules , the regulator has provided practical guidance to helps firms comply with the new Duty and meet the regulators expectations.
 
Finalised Policy Statement
Finalised Guidance Paper
 
The FCA have also published a page on their website which is dedicated to the Consumer Duty.  This dedicated page offers help and support for firms.
 
FCA Consumer Duty Website
 
 
The introduction of the Consumer Duty is the biggest regulatory shift in financial services in recent years.  The FCA have made it clear in their Policy Statement (PS22/9), that Consumer Duty is not a ‘one size fits all’ and that implementation plans need to be tailored to each firm and their practices.
 
The regulators aim is to ‘ensure a higher and more consistent standard of consumer protection for users of financial services, and to prevent harm before it happens.
 
Having a good understanding of Consumer Duty is an important part in a firm being able to implement it properly and confidently.   The new Duty is broken down in three sections, The Principle, cross cutting rules and the four outcomes.
 
The Principle
 
An introduction of a new Principle 12 is being introduced with the aims of setting higher standards for firms.  When Principle 12 applies, it overrides the existing Principles 6 (treating customers fairly) and 7 (clear, fair and not misleading communications).  The new Principle 12 is outcomes focused and therefore each firms implementation plan also requires this approach.  One of the aims of Consumer Duty is for firms to be more proactive.
 
The cross-cutting rules
 
Underpinning the new Principle, the FCA have laid out three cross-cutting rules, which are,
 

• Acting in good faith
• Avoid causing foreseeable harm
• Enable and support retail customers to achieve their financial objectives

 
The four outcomes
 
The four outcomes should be central to a firms’ implementation plan
 

• Products and services
• Price and Value
• Consumer Understanding
• Consumer Support

Other areas to consider
 

• Testing
• Training

 
Cost-of-living crisis
 
 The cost-of-living crisis has intensified the focus on customer outcomes, specifically as more consumers are now finding themselves in financial difficulty.  The FCA have stated they expect to see a rise in consumer borrowing and the demand for credit, potentially putting more customers at risk due to affordability.   Firms therefore need to ensure that they have robust affordability processes in place.
 
Next steps
 
The FCA have released five key milestones for firms to prepare for.
 

1. 27^th July 2022 – Finals rules and guidance published
2. 21^st October 2022 – Firms to agree implementation plans
3. 30^th April 2023 – Manufacturers to complete reviews to meet the outcome rules
4. 31^st July 2023 – Rules start for open products/services
5. 31^st July 2024 – Rules start for closed products/services

 
The experts here at PPL have created an implementation plan template, along with a suite of resources to help firms with their implementation of the new Duty.  If you would like to register your interest and be contacted by a member of the team to discuss how we can work with you to ensure you are fully compliant by 31^st July, then please complete the below form and we will be in touch.