The Consumer Duty – Final Rules and Guidance Published

The FCA has now published its final rules and guidance for the new Consumer Duty, along with a welcome extension of 3 months to the implementation date, which moves from April 2023 to 31 July 2023. The clock starts now for firms that need to implement the new Duty. Those that have previously acted to deal with practices that the FCA have warned against and those that have kept ahead of the expectations around fair treatment of customers are likely to have less to do to get up to speed, however all firms will need to use the latest publication to benchmark and audit their current practices.

Firms across the industry agree broadly with the overarching aim of the Duty – a more modern take on the fair treatment of consumers than the FSA’s initial attempts – particularly given the current economic climate. This doesn’t detract from the fact that this is the second major regulatory regime in five years that most firms have had to embed. Depending on current practices, implementing the Duty will either represent the next step on a trajectory, or a major shift in the way things are done.

Those who see the Consumer Duty as an opportunity to switch up practices and demonstrate to consumers that the industry is ethical and trustworthy will benefit. The Duty is designed to be proportionate, meaning that firms will be able to take the overarching expectations and fit them to their own firm and customer base. It also offers the opportunity for firms that are looking to progress, particularly as concerns meeting their customers’ needs; embracing the spirit as well as the letter of the Duty.

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FCA’s Consultation on a New Consumer Duty

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Gap Analysis Auditing

The Consumer Duty Course

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With the elements of the Consumer Duty now set in stone, firms need to capitalise on the remaining 12 months before introduction to get up to speed.

Behaviour and culture

SM&CR introduced a higher standard for a positive culture throughout the industry, and the Duty takes this a step further. A healthy culture needs to be represented throughout firms and from the top down, but the Duty will likely mean that conduct of staff at all levels must be more comprehensively monitored, with action taken where issues arise.

Quality Assurance and monitoring

QA has been a key element of regulatory compliance, particularly since the introduction of the FSA. While most firms will QA some elements of work, and a small percentage of customer interactions, this will now need to increase – and fairly substantially for some sectors or firms who deal with a sizable proportion of vulnerable customers. QA and monitoring exercises must be audited with outcomes testing in mind. To do this, firms will need to be sure of what good outcomes look like for its customer base.

Agent training

Like the Conduct Rules, the Consumer Duty represents a significant shift in how business needs to be done. The Principle, cross-cutting rules and outcomes undoubtedly place obligations on senior management and on those responsible for strategy, but more than this, staff at all levels need to be aware of the implications of the Duty and what this will mean for their day-to-day duties and how they undertake their work.

Further, all training currently offered will need to be audited to make sure that the Duty is represented throughout.

Vulnerable customers

Most firms have vulnerable customer processes in place; the Duty means that firms will now need to audit their processes to ensure that fair treatment of vulnerable customers is factored in throughout the customer journey.

Complaints Management

The FCA have highlighted that to measure the success of the Consumer Duty, they will be monitoring complaints data. Firms can use complaints to proactively monitor their early success or failures with the Duty; the FCA will expect to see fewer upheld complaints about poor value and unexpected fees or charges, products not working as expected, customer service, and difficulty with switching or cancelling products. Firms must make sure that any sign of a customer complaint is identified and acted on. Complaints training should be reviewed and agents should receive regular complaints training.

It is important – at this juncture – to be honest about exactly what the Duty will mean. More, even, than SM&CR, the Consumer Duty signals the biggest shift in financial regulation in recent years. The focus cannot, for regulated firms, be on profit and products, but has to move to delivering good outcomes for customers. This cannot be stressed enough. It is not enough to tell the regulator “we tried.” The new Principle is clear – it is the achievement of good outcomes, rather than the attempt, that matters.

Our online Consumer Duty course takes learners step-by-step through the expectations of the Duty, covering the background, Principle, cross-cutting rules, and the four outcomes. Each online course is priced at just £20.

Conducting a gap analysis around a set of high-level expectations is a difficult task. We offer a Comprehensive Gap Analysis Service that benefits from our knowledge of best practice and what the regulator wants to see from experience with firms throughout the industry.

For more information, contact Rob Bell: robert.bell@rbcompliance.co.uk.