With Consumer Duty coming into force at the end of July 2023, the Financial Conduct Authority (FCA) has called on firms to ensure they are on track to meet the implementation deadline.

In a recent update, the regulator posed 10 key questions for firms to consider, noting that ‘firms can expect to be asked questions like these in their interactions with them’.[1]

Key questions include:

• Have you identified the key risks to your ability to deliver good outcomes to customers and put appropriate mitigants in place?
• What assessment have you made about whether your customer support is meeting the needs of customers with characteristics of vulnerability? What data, MI and customer feedback is being used to support this assessment?
• Do individuals throughout your firm – including those in control and support functions – understand their role and responsibility in delivering Consumer Duty?

How confident are firms in their approaches to culture, people and data?

Research conducted by Elephants Don’t Forget (during our Consumer Duty webinar series) has found that some firms are still not entirely confident in their approaches to culture, management information, people competence, and their ability to evidence that their staff fully understand Consumer Duty requirements.

In March 2023, 77% of 433 compliance and risk professionals polled stated that they were only somewhat confident that they have the appropriate data and MI to meet their obligations.[2]

With regards to people capability under Consumer Duty, 84% of 246 compliance, risk, oversight, T&C and operations professionals polled in May 2023 candidly stated that they were only somewhat confident that they could evidence to the FCA that their people fully understand their Consumer Duty obligations.[3]

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Are firms on track to meet the deadline?

The regulator commissioned Ipsos UK to undertake an anonymous survey of 1,230 firms in some of the sectors in scope of Consumer Duty to help them understand how prepared firms were in meeting the implementation deadline of the 31 July 2023.[4]

The survey – which ran between March and early May 2023 – focused on quantitative and qualitative research, and found that:

• 64% of firms said that they would be fully compliant by the deadline.
• 23% of firms said they would comply with most requirements by the deadline but would still have some work to do.
• 7% of firms surveyed said they would still have significant work to do after the deadline or had not started work on Consumer Duty.

Retail finance providers and debt advice firms were noted as scoring consistently lower than other groups with regard to engagement, understanding, and implementation progress.

The regulator noted that:

“Firms that have not been taking Consumer Duty seriously – and are a long way from meeting its requirements – need to make strenuous efforts in the next month to accelerate their implementation work, prioritising the work that is likely to have the greatest impact on consumer outcomes.”

The FCA also stressed that firms who are confident of meeting the implementation deadline need to maintain oversight of their implementation plan to ensure they remain on track to deliver in time. Boards and management should assure themselves that their firm has fully engaged with the details of the requirements and the shift to focus on consumer outcomes.

Prioritisation of improving consumer outcomes and reducing risk of harm were specifically cited by the regulator as priority actions that firms need to focus their immediate efforts on.

In instances where a firm believes that they will be in significant breach of Consumer Duty when it comes into force, the FCA said it must alert them. The regulator also issued a warning, stating that firms should be prepared for the regulator to take robust action where they see firms’ failure to implement Consumer Duty causing actual or potential harm to consumers. This could include holding senior managers to account where they have failed to act to implement Consumer Duty and prevent such harm.

Sources:

[1] https://www.fca.org.uk/news/news-stories/one-month-go-consumer-duty

[2] Elephants Don’t Forget, ‘How to approach Management Information (MI) for Consumer Duty’, webinar poll, 29 March 2023. 433 professionals polled.

[3] Elephants Don’t Forget, ‘How to successfully approach Training & Competency (T&C) under Consumer’, webinar poll, 24 May 2023. 246 professionals polled.

[4] https://www.fca.org.uk/data/consumer-duty-firm-survey-spring-2023