The Financial Conduct Authority (FCA) has introduced the Consumer Duty to enhance consumer protection and ensure firms deliver good outcomes for their customers. This regulatory framework raises the standards of consumer care and transparency across financial services. Businesses must act proactively to comply with these new requirements.
What is the FCA Consumer Duty?
The Consumer Duty establishes higher expectations for firms by introducing:
- A New Consumer Principle. This means that you must act to deliver good outcomes for retail customers.
- Cross-Cutting Rules. These rules clarify how you should apply the principle in practice, focusing on:
- Acting in good faith.
- Avoiding foreseeable harm to customers.
- Enabling and supporting customers to pursue their financial objectives.
- Four Outcomes. The FCA has outlined key areas where you must improve customer experience:
- Products & Services: Ensuring products meet the needs of target customers.
- Price & Value: Products must provide fair value.
- Consumer Understanding: Communications should be clear, fair, and not misleading.
- Consumer Support: Providing effective and accessible customer service.
Who Does It Apply To?
The Consumer Duty applies to a range of FCA regulated firms, including:
- Banks and building societies
- Consumer credit firms
- Insurance companies and brokers
- Investment firms
- Payment service providers
- Mortgage lenders and brokers
It covers both new and existing products and services that are open for sale or renewal. Closed products will also need to be reviewed to ensure they meet the required standards.
Key Steps to Implement the FCA Consumer Duty
1. Conduct a Gap Analysis
Evaluate your current processes against the Consumer Duty requirements to identify areas for improvement.
2. Review Product Governance Frameworks
Ensure that products and services are designed to deliver value and meet customer needs. Regularly review product suitability and performance.
3. Enhance Consumer Communications
Simplify your customer-facing communications to ensure they are clear, informative, and facilitate better financial decision-making.
4. Assess Pricing & Value
You must be able to justify your pricing structures and demonstrate that products offer fair value to consumers.
5. Strengthen Customer Support
Ensure customers can access support easily, with well-trained staff available to assist in decision-making and issue resolution.
6. Embed a Consumer-Centric Culture
Senior management must take ownership of Consumer Duty compliance. You should embed a culture where consumer outcomes are a core focus in decision-making.
7. Monitor and Evidence Compliance
Regularly review and document compliance efforts. The FCA expects you to collect data demonstrating how you meet the Consumer Duty obligations.
What Happens If You Don’t Comply with the FCA Consumer Duty?
Failure to comply with Consumer Duty may result in regulatory action, including:
- FCA investigations
- Fines and penalties
- Reputational damage
Need help implementing FCA Consumer Duty? Contact Us
Consumer Duty is a significant shift in the regulatory landscape, requiring firms to prioritise consumer interests at every stage. By implementing these changes effectively, you can not only achieve compliance but also build stronger relationships with your customers.
If you need tailored support to align your business with Consumer Duty requirements, get in touch using the Contact Us page.
