FCA Consumer Duty

Overview

The FCA's Consumer Duty (Duty) is a key and a significant FCA initiative, which builds on the FCA's Treating Customers Fairly and Conduct Risk initiatives. 

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

Key Components

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).  The Consumer Principle provides an overall yardstick for the FCA to assess a firm’s behaviour and actions.

2. 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.

3. 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.

There is a significant amount of FCA detail which sets out the specific requirements relating to these outcomes, which is captured in the FCA's final rules.

What your firm needs to do

The Consumer Duty requires firms to put customer outcomes at the centre of their business. This means embedding the Duty into your strategy, governance and day-to-day operations, and demonstrating that it is working in practice. In particular:

• Review existing products and assess new products before launch. Ensure they meet customers’ needs, provide fair value, are sold to the right customers and include clear information and appropriate support. Review them regularly and address any risks of customer harm.
• Establish clear senior management accountability. Senior Managers must take reasonable steps to ensure compliance within their areas of responsibility. They may be held personally accountable where a breach occurs and they have failed to take those steps.
• Monitor and evidence customer outcomes. Use meaningful management information to assess whether customers receive good outcomes, including customers with characteristics of vulnerability. Investigate poor outcomes, address their causes and check that corrective action is effective.
•  Equip your staff. Provide practical training tailored to employees’ roles, covering the Duty, the relevant Conduct Rules and their responsibilities for delivering good customer outcomes.
• At least annually, your Board or equivalent governing body must review and approve the Consumer Duty report, confirm whether the firm is meeting its obligations, assess whether its future business strategy is consistent with the Duty and agree any actions required.

Further Information

Please see our blogs:

 FCA Consumer Duty: 5 things you need to know

FCA Consumer Duty: Making sense of Outcome 2: Price and Value