Retail banking Consumer Duty multi-firm work

The Financial Conduct Authority (FCA) has published the findings from a review of the implementation of the Consumer Duty among retail banks, which became effective in July 2023. The review was conducted among 47 institutions to ascertain that customers are served the best way possible in alignment with the high product, price, and quality standards of the Duty.
The FCA thereby
– reviewed how firms are supporting customers who are experiencing financial difficulty, including their use of forbearance measures and their communication with customers in arrears.
– examined how firms are handling the accounts of deceased or incapacitated customers, including their communication with next of kin and their processes for identifying and reporting suspicious activity.
– assessed how firms are preventing, detecting, and responding to fraud and security breaches, including their communication with customers and their use of technology to detect and prevent fraud.
– reviewed how firms are serving small and medium-sized enterprises (SMEs) with business current accounts, including their pricing transparency and their support for SMEs in financial difficulty.
– assessed how firms are handling mortgages for debt consolidation, including their assessment of customers‘ ability to repay the debt and their communication with customers about the risks of debt consolidation.
What the FCA found is the following, among others:
– Overall, firms are taking a more proactive approach to identifying and addressing potential harm to consumers, but there is still room for improvement in some areas.
– Many firms have set clear frameworks and methodologies for product and service journeys to identify gaps and subsequently prioritize actions to improve consumer outcomes. Others, however, obviously refrain from using such elements leading to weaknesses in identifying where improvements are needed to comply with the new Duty.
– Firms have made progress in supporting customers in financial difficulty, but there are still issues with communication and the use of forbearance measures. In this context, the FCA notes that some banks have even implemented separate support teams and processes to aid their customers in financial difficulties, for example via the consideration of alternative borrowing options to overdrafts.
– There has been progress in addressing fraud reporting issues, but more needs to be done to prevent fraud from occurring in the first place, particularly in areas such as identity verification. A key identified issue was the number of calls some customers need to make to get a hold of a representative to report fraud on a customer account.
– There were inconsistencies in the way that firms conducted reviews of business current accounts (BCAs). While some firms conducted a thorough review of the full range of BCAs available to customers, including their individual features, others relied on customer awareness of fees and charges as evidence that the product provided fair value.
– Many firms have actively improved their communications to customers about the risks of debt consolidation, particularly in cases where the customer is consolidating unsecured debt into a secured mortgage. Others, however, didn’t even consider the possibility of customers using mortgages for debt consolidation, let alone addressing this issue with their clients.
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##### The FCA’s expectations and way forward
FCA expects firms to put consumers at the heart of their business, act in good faith, avoid causing foreseeable harm, and enable and support retail customers to pursue their financial objectives. Firms are also expected to comply with the Consumer Duty in all aspects, including the design of products and services, price and value, consumer understanding, and consumer support. Firms must also ensure they have appropriate information to evidence the outcomes for customers are positive and in-line with the new Duty.
The FCA finally concludes that it will continue to monitor how firms are meeting the higher standards of the Duty, engage with firms on their implementation plans for closed book products, and remind firms that their Board must annually review and approve an assessment of whether the firm is delivering good outcomes for its customers.