PIMFA
CONSUMER DUTY
The Consumer Duty is intended to ensure a higher standard of care across financial services for retail customers and to deliver good consumer outcomes throughout the life cycle of products and services.
The Consumer Duty is a significant regulatory change with a need for a shift in culture and mindset to focus on delivering good outcomes for retail customers. The Consumer Duty is subjective and requires a holistic approach: firms need to consider the application of the duty in line with their size, type and role within the distribution chain.
- Background and aim
The Consumer Duty aligns with the Financial Conduct Authority’s (FCA) business priorities focused on consumer outcomes and reducing and preventing serious harm. The FCA is increasingly focused on addressing consumer harms, particularly given the rise in customer vulnerability (as shown by responses to the FCA’s Financial Lives Surveys). The Consumer Duty intends to create a higher level of consumer protection in retail financial services, with the FCA highlighting their data-led and outcomes-based approach to supervision.
- ELEMENTS OF THE CONSUMER DUTY
- Consumer Principle 12 states that a firm must act to deliver good outcomes for retail customers.
- Cross-cutting rules state that firms must:
- Act in good faith toward retail customers
- Avoid causing foreseeable harm to retail customers
- Enable and support retail customers to pursue their financial objectives
- Products and services
- Price and value
- Consumer understanding
- Consumer support
This report is free for our members and is available to purchase for non members.
latest news
Financial Conduct Authority – Consumer Duty update
The Financial Conduct Authority (FCA) has provided an update concerning Consumer Duty, highlighting a range of resources, including last month’s Consumer Understanding Good and Poor Practice publication and the recent blog, Insights on Consumer Duty Board Reports. The update also covers:
Smaller Firms Support
- An ongoing focus in helping smaller firms apply Consumer Duty is noted, with the FCA highlighting specific insights for smaller firms (e.g. in the consumer understanding good practice review and Board Reports requirements).
- The regulator will include further insights for smaller firms going forward and intends to update existing Consumer Duty Best Practice Resources.
Supporting Consumers in Vulnerable Circumstances
- A recent LinkedIn article by Charlotte Clark (FCA Director of cross cutting policy) on the impact of Consumer Duty is highlighted for firms to consider areas for improvement.
Balancing Regulatory Obligations for Vulnerable Consumers
- The Joint Statement with the Information Commissioner’s Office to help firms support customers, share data appropriately, and monitor outcomes is also noted.
Updated Consumer Duty Webpages
- Firms are advised that Consumer Duty webpages have been reviewed to bring key guidance into a clearer, more structured layout.
Financial Conduct Authority – Blog: Consumer Duty Board Reports
The Financial Conduct Authority (FCA) has published a blog concerning Consumer Duty Board reports. Having considered previous report submissions, the regulator outlines improvements seen as well as expectations going forward.
Areas of progress include:
- Stronger governance and clearer Board oversight
- Better action plans and ownership
- Broader and more insightful data
Aspects for improvements are also highlighted, e.g.:
- Clearly link data to customer outcomes
- Monitor outcomes delivered by third parties
- Evidence meaningful Board challenge
- Deepen assessment of consumer understanding and support
The FCA sets out the expectation on firms to draw on these insights as they consider submissions for this year.
Firms are advised to continue strengthening outcome monitoring, governance and distribution oversight to facilitate ongoing delivery of good outcomes.
The regulator states further examples of good and poor practice (including providing extra insights to help smaller firms) will be shared.
Read the blog here
