“On behalf of your industry peers who have made the effort, we can confirm that the Consumer Duty will not go away. Their hard work has not been wasted. And you still have time to deliver. But you must act now. The deadline of 31 July [2023] will not be moved.”
This was the main takeaway from the FCA's Executive Director for Consumer and Competition, Sheldon Mills’, most recent speech.
The Consumer Duty is the FCA’s flagship policy and is the cornerstone of their 2022-2025 three-year strategy. Sheldon was eager to highlight the once-in-a-lifetime opportunity presented to firms by the duty in the following areas:
Save money and stress - Where firms meaningfully engage with the Duty, they will be able to prevent customers from having poor experiences. This leads to less redress and fewer complaints.
Fix things before they go wrong - Having appropriate monitoring frameworks in place will enable firms to quickly identify where outcomes are slipping, and adequate MI will allow targeted improvement.
Innovation - The Duty is a unique opportunity for firms to think differently and reassess their existing approaches towards retail customers.
Key things to note:
Deadlines
The FCA will not extend the milestones for full implementation of the Duty. The Cost-of-Living Crisis, which has hit vulnerable groups the hardest, highlights the urgency of customer-orientated regulations. The principles-based nature of the Duty means that firms will need to direct efforts towards complying with not only the letter of the regulation, but also the spirit of it.
Enforcement
Firms that fail to fully implement the Duty and will be identified and penalised by the FCA. Information has already been requested as part of the FCA’s Multi-Firm Review on the Duty, and it was stated that more will be requested from as many as 600 small firms. It was made exceptionally clear that significant action will be taken where firms find themselves in breach of the Duty, but that the FCA will go after the worst offenders first in an approach described as ‘pragmatic and proportionate’. This should underline the importance that the FCA is attaching to the Duty and emphasise that firms will need to make significant changes to satisfy the FCA that they are engaging with the substantive requirements of the Duty.
FCA Support
Practical guidance has and will continue to be offered by the FCA to support firms in the development of implementation plans, with further examples of good practice available here. In terms of next steps, Sheldon highlighted ‘spring cleaning’ as an immediate area of priority for firms. To fully comply with the Duty, firms will need to cut back on sludge practices and punitive exit fees that restrict customers’ opportunities to change the products and services they use.
Ongoing Support
As the deadlines for implementing the Duty close in, we at Novatus can offer a range of services from rapid health-checks, validation and review of implementation plans, and full implementation covering each stage of the implementation timeline. We can draw on a wealth of experience in advising your peers meet their Consumer Duty milestones, as well as other previous customer-orientated regimes such as Vulnerable Customers Guidance. If you would like to discuss our offerings further, please contact Francis Stroudley - fstroudley@novatusadvisory.com.