Consumer Duty – Room for Improvement

Three months after the Consumer Duty’s (the Duty) implementation in a speech delivered by Nisha Arora highlighting the Duty’s significance is evident through the positive changes observed in the industry. This momentum must continue to bring further advantages to consumers, firms, and the broader UK economy. Compliance with the Duty is not a one-time task; it demands continuous improvement and evidence of such efforts in annual board reports. Firms should also ensure they are on track for the 31 July 2024 deadline for closed products and services.

If your firm requires support in this field Objectivus will be able to guide you through the review process and any additional support needed. Please get in touch with Nicholas Dun njd@objectivus.com or Bhavisha Patel bp@objectivus.com

In the speech Nisha identified customers who were affected by poor practices. The Financial Conduct Authority (FCA) prioritises the Duty, pledging ongoing efforts across sectors to ensure firms’ compliance and to share best practices. This priority is underscored by experiences of consumers like Frank, who faced challenges with his bank’s communication due to his declining eyesight, and Andreas, who had difficulty cancelling his car insurance online. Similarly, Renata encountered unavailability of services at her bank during a bereavement period.

Survey findings indicate that 14% of adults struggled to contact their financial service providers, and 7% could not get the needed information or support. Those with vulnerability characteristics reported even less helpful customer support, highlighting a lack of confidence in the financial services industry among many UK adults.

Positive developments since the Duty’s implementation include firms simplifying communication, being transparent about product exclusions, and considering fair value in fee structures. Firms are encouraged to maintain this progress and continuously assess and improve their practices, particularly for vulnerable customers. This involves a cultural shift within firms, integrating the Duty into every aspect of their operations, from board decisions to front-line services.

Next steps for firms involve reviewing implementation plans, monitoring outcomes, and preparing for the closed products deadline in 2024. The FCA expects firms to produce an annual board report evaluating their compliance and addressing any shortcomings. Firms need to be mindful that an annual report can only be produced if proper data and management information against the 4 outcomes is already being collated and reviewed regularly by senior management.

The FCA’s approach to monitoring compliance will be thorough and continuous, with a focus on quick intervention in markets where consumers face poor outcomes. Firms can expect the FCA to maintain the Duty as a core part of their regulatory activities, including authorisations, supervision, and enforcement. The FCA will also highlight good practices and share findings to promote improvements across the financial sector. The Duty is not only a directive for firms but remains a central priority for the FCA in its commitment to enhancing financial market operations and consumer outcomes.