Consumer Duty

FCA Consumer Duty

The FCA’s Consumer Duty (Duty) is a very important FCA initiative, which builds on the FCA’s earlier work in relation Treating Customer Fairly.

The Duty relates to the design, sale and servicing of products and services.  Firms need to assess and show that they are delivery good customer outcomes throughout the entire product life cycle.  This means that you need to review how you create and sell your FCA regulated products and services, check and where required enhance the quality of your customer support before the FCA deadline (see below) and make the necessary improvements to meet the Duty requirements.

 The Consumer Duty Framework

The Duty consists of 3 elements:

  1. Consumer Principle

This is a new FCA Principle 12 which requires firms to “act to deliver good outcomes for retail customers”.  It replaces FCA Principle 6 (treating customers fairly) and Principle 7 (communicate to customers in a way which is clear, fair and not misleading). 

  1. Cross Cutting rules

These rules set out how we should act to deliver good outcomes to our retail customers.  They set the standards of behaviour the FCA expects under Principle 12 and help to interpret the four outcomes, which set the detailed rules.

  1. Four outcomes

These set out the detailed requirements which firms are required to achieve.  In particular you need to ensure that:

  • Your products and services are fit for purpose and deliver good customer outcomes
  • Customers receive a fair value for the products and services they purchase from you
  • Customers receive appropriate information at the right time and in a way in which they can understand
  • Customers receive appropriate support to enable them to realize the benefits of the products and services they buy.

The Changes you need to make

The wide-ranging rules require you to review and update key areas of your business.  You will need to make changes to the way you design, price and sell your products and services to ensure they are benefitting customers.

Senior Managers and the firm’s internally appointed Consumer Duty Champion will need to ensure that the Duty is embedded in the firm’s business areas and they could be held accountable for failures to comply with the requirements and standards of the Duty

Your firm will need to have appropriate management information to show that you are delivering good customer outcomes and making any improvements which may be necessary.

Key Deadlines

The FCA has set four key deadlines:

  • October 2022: Board to have challenged and agreed the Implementation Plan
  • April 2023: Manufacturers to have completed their reviews for their existing open products and shared information with distributors
  • 31 July 2023: Requirements apply to new and existing products and services
  • 31 July 2024: Requirements apply to closed products and services.

Contact us today for further information and support.