Consumer Duty - Four Weeks before the Revolution Starts!

We’re now under four weeks away from the start of the Financial Conduct Authority’s Consumer Duty regime.

This introduces a new Consumer Principle which requires firms “to act to deliver good outcomes for retail customers”. 

Finance institutions and key operators such as brokers have been warned they must be ready for one of the biggest-ever shake-ups of consumer finance - all aimed at improving outcomes for customers. This could mean customers being told about better interest rates on a mortgage or scrapping unreasonable fees. The FCA has been outspoken saying it will come down hard on those who ignore or flout these expectations. 

A statement from the authority in recent days says many firms are working hard to meet these new and higher standards. But for those not there yet, the authority has 10 questions that should be asked.

1. 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?  
2. 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?   
3. 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?  
4. What data, MI and other intelligence are you using to monitor the fair value of your products and services on an ongoing basis?  
5. How are you testing the effectiveness of your communications? How are you acting on these results?   
6. 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?

7. 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?  
8. 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?  
9. Do individuals throughout your firm – including those in control and support functions – understand their role and responsibility in delivering the Duty?  
10. Have you identified the key risks to your ability to deliver good outcomes to customers and put appropriate mitigants in place? 

The FCA says: “These questions should help firms to reflect on their implementation of the Consumer Duty and identify gaps or areas for improvement. Firms can also expect to be asked questions like these in their interactions with us.”

It has also set up a Consumer Duty page with resources to help everyone understand the authority’s expectations and implement the Duty effectively. 

And it warns: ”Once the Duty is in force we will prioritise the most serious breaches and act swiftly and assertively where we find evidence of harm or risk of harm to consumers.”