With six months to go before the Consumer Duty comes into force, the Financial Conduct Authority (FCA) has published a review of how firms are planning to implement the Duty.
The FCA reviewed a sample of implementation plans and found that many firms show they understand and embrace the shift to delivering good customer outcomes, which the Duty will bring, and have established extensive programmes of work to comply with it properly.
However, the FCA also found that some firms are further behind in their planning, so there is a risk that they may struggle to apply the Duty effectively once the rules come into force.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:
“The Consumer Duty will bring about a step change in the way financial services firms treat their customers and we welcome the work firms are doing to implement it. Given the scale of the reform, we recognise that some firms need to make significant changes. For firms which are further behind in making the necessary changes, there is time to put that right and for them to show they are acting in the spirit of the new Duty.
“Firms will also see the benefits of the Duty, with increased trust in the sector, more flexibility to innovate and in time fewer rule changes.”
Over the remaining six months of this implementation period, the FCA wants firms to particularly focus on:
- Prioritising: Firms should make sure they are prioritising effectively, with a focus on the areas that will make the biggest impact on outcomes for consumers.
- Making the changes needed: The FCA urges firms to ensure they are making the changes needed so consumers receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.
- Working with other firms: Firms need to share information and work closely with their commercial partners to make sure they are all delivering good customer outcomes. The FCA has found that some firms need to accelerate this work to implement the Duty on time.
The Consumer Duty is a cornerstone of the FCA’s three-year strategy and will help the FCA set and test higher standards, and reduce and prevent serious harm. Parliament has given the FCA a mandate to introduce the Duty through the Financial Services Act 2021.
The rules come into force on 31 July 2023 for new and existing products or services that are open to sale or renewal, and 31 July 2024 for closed products or services.