Financial institutions across the UK have been issued a one-month notice to comply with the new Consumer Duty, by the Financial Conduct Authority (FCA) today.
Set to come into force on July 31st, 2023, the Duty will apply to both new and existing products and services currently open for sale or renewal.
The Consumer Duty marks a significant departure from previous guidelines, demanding a higher standard of consumer consideration and accountability from financial firms.
The FCA has commended many companies who have been diligently working towards meeting these stringent new standards.
According to a recent FCA survey, a majority of the firms within the regulated sectors have indicated that they are poised to fully implement the Consumer Duty by the deadline.
However, the survey has also revealed that some firms have yet to make significant progress and are now under pressure to meet the upcoming deadline.
With the clock ticking, the FCA has underscored the need for firms to engage in a rigorous self-assessment process, ensuring they are in compliance with the new guidelines and are prepared for the impending changes.
In a bid to facilitate this, the FCA has released a finalised guidance document (FG22/5) which poses a series of suggested questions for firms. These questions focus on areas such as product design, risk assessment, and consumer communication, aiming to identify potential compliance gaps and remedial measures.
The FCA’s Consumer Duty page has been augmented with a range of resources, including podcasts, webinars, speeches, and updates addressing common queries. It has emerged as a valuable repository for firms working to comply with the Duty, with 96% of surveyed respondents reporting they found the resources helpful.
Once the Consumer Duty comes into effect, the FCA has vowed to crack down on any breaches, particularly those posing a serious risk or harm to consumers. Firms are thus urged to ensure they are fully compliant by the end of the month to avoid any potential penalties.
10 key questions the FCA says firms should consider: Â
- Are you satisfied your products and services are well designed to meet the needs of consumers in the target market, and perform as expected? What testing has been conducted?
- Do your products or services have features that could risk harm for groups of customers with characteristics of vulnerability? If so, what changes to the design of your products and services are you making?
- What action have you taken as a result of your fair value assessments, and how are you ensuring this action is effective in improving consumer outcomes?
- What data, MI and other intelligence are you using to monitor the fair value of your products and services on an ongoing basis?
- How are you testing the effectiveness of your communications? How are you acting on these results?
- How do you adapt your communications to meet the needs of customers with characteristics of vulnerability, and how do you know these adaptions are effective?
- What assessment have you made about whether your customer support is meeting the needs of customers with characteristics of vulnerability? What data, MI and customer feedback is being used to support this assessment?
- How have you satisfied yourself that the quality and availability of any post-sale support you have is as good as your pre-sale support?
- Do individuals throughout your firm – including those in control and support functions – understand their role and responsibility in delivering the Duty?
- Have you identified the key risks to your ability to deliver good outcomes to customers and put appropriate mitigants in place?
