10 Things You Need to Know

  1. The consumer came into effect on 31 July 2023 for new and existing products and services, and for closed book products, it will be applicable as of 31 July 2024. Boards needed to agreed their implementation plans and intention to maintain oversight by 31 October 2022.
  2. The Duty introduces a new principle for business – Principle 12. Under the Consumer Duty Principle: a firm must act to deliver good outcomes for retail customers. Firms will be expected to comply with Principle 12 (and related rules/guidance in PRIN 2A)
  3. The duty sets a higher standard of care and expectation than the existing set of principles rules, and guidance and relates to the culture of a firm.
  4. The emphasis on firms to deliver good outcomes needs to be embedded across the firm/business model with annual board attestation of delivering good outcomes another requirement of the duty.
  5. The Duty introduces a new conduct rule for SMCR (Code of Conduct sourcebook (COCON), establishing responsibility for all conduct rule staff in ensuring the firm complies with the duty: You must act to deliver good outcomes for retail customers.
  6. Principle 12 is underpinned by three cross cutting rules and four outcomes which aim to provide greater clarity to firms on the FCA’s expectations to drive a higher, consistent level of protection across the industry.
  7. The cross-cutting rules state a firm 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.
    • Additional obligations in COCON reflect the cross-cutting rules as well.
  1. Firms must give consideration to the four outcomes: products and services, price and value, consumer understanding, consumer support. These outcomes set out key elements of the firm-consumer relationship, providing detailed expectations of a firm for compliance with the duty.
  2. The four outcomes are inter-related: meeting obligations under products and services and consumer understanding may help firms to deliver good outcomes and evidence fair value.
  3. Evidencing compliance with the duty is vital: firms need to ensure they document and record their processes, decision making and ongoing reviews of products services and procedures. Use of data (reporting and management information) will be key to meeting your requirements. Existing compliance processes for SMCR, treating customers fairly and PROD can be used as a foundation for meeting obligations under the duty.

Read the FCA’s Review of Fair Value Frameworks (May 2023) where they consider best practice and areas for improvement in relation to: 

  • Understanding of fair value rules
  • Assessing value
  • Considering contextual factors
  • Assessing differential outcomes 
  • Data and governance

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