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  • Robert Bell

Empowering Consumers: The FCA's commitment to executing the Consumer Duty

Following a review of the cash savings market, the FCA has released an action plan in relation to savings rates offered by Banks and Building Societies. Even if you’re not operating in this market, read on as this article describes how the FCA are using the Duty as part of their regulatory tool-kit.

The FCA found that while interest rates on savings accounts have been rising, this has been happening more slowly for easy access accounts. There has also been significant variance between firms, with smaller firms offering higher interest rates on average than their larger competitors.

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Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: “We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates. We welcome the progress that has been made so far but this needs to speed up. We will be using the Consumer Duty to ensure this is the case – with firms required to prove to us that they are offering their customers fair value.”

So, what are the FCA doing?

Firstly, they have required firms offering the lowest savings rates to send their fair value assessments and the FCA are currently reviewing whether they demonstrate good value; the FCA have stated they will require action to be taken where they don’t demonstrate fair value. At RB Compliance we have been helping firms with the implementation of the Duty, quite often the drafts of fair value assessments we saw were very basic, offering little insight or new information and often containing general or sweeping statements without any data to back them up. Where firms still have such basic assessments in place, alarm bells should be ringing as the FCA may well require sight of your assessments at short notice and use these to decide whether action will be taken.

Secondly, the FCA are intervening in relation to how long it takes firms to change their savings rate following a base-rate change. Again, they are using the price and value outcome under the Duty as their regulatory tool. PRIN 2A.4 clearly sets out the need to undertake new value assessments where there are market changes. An obvious one is a change in the base rate, therefore firms need to recognise the living nature of the value assessments and be agile enough to undertake new assessments when triggered.

Under price and value, they are also analysing the difference between on-sale and off-sale products, challenging firms to explain how large differences offer fair value and considering further action if this gap does not continue to close.

They are also leaning on other outcomes, such as consumer understanding, by closely monitoring the effectiveness of customer communications, placing a requirement for larger firms to provide the FCA with an evaluation by the end of 2023 along with any follow up action they are taking. Additionally, under the financial objective cross-cutting rule, they want to see firms support consumer financial resilience by encouraging customers to start saving and/or search for higher rates.

The FCA expects firms to use their fair value assessments of on-sale savings products to assure themselves and the FCA, where needed, that these represent fair value for customers and ultimately prompt their customers in lower paying savings accounts or non-interest bearing accounts to consider alternatives.

This action gives us excellent insight into the approach taken by the FCA and the robustness needed in our value assessments, product reviews and approach to communication. If you’re nervous about yours, perhaps now is the time to review.

To help, our popular range of Consumer Duty resources are designed to help firms embed the Duty. We offer product review templates, free webinars, plans and process templates.

Now is the time to reflect on the progress made to date, specifically the level to which the duty is truly embedded in your organisation’s culture and processes.


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