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 Customer 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 delivery 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.

Changes required

The Duty will give to significant changes across the financial services industry.  In particular:

• You will need to make changes to the way you design, price and sell your products and services to ensure they are benefiting customers
• Senior Managers and the firm’s internally appointed Consumer Duty Champion will need to ensure that the Duty is met across 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 (MI) to show that you are delivering good customer outcomes and that you are making any improvements which may be necessary
• You will need to provide relevant training to your staff, particularly in relation to the conduct rules associated with the Duty
• Your governing body will need to review and approve the firm’s assessment of whether it is delivering good outcomes for its customers least annually.

Deadlines

The FCA has set four key deadlines which you are required to meet:

• 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.

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