Consumer Duty: Not once and done

Mrs. Nisha Arora, Director of Cross Cutting Policy and Strategy at the Financial Conduct Authority (FCA), delivered a speech at Deloitte on November 1, 2023 about the importance of the Consumer Duty in the financial services industry. She thereby shared various stories which illustrate some of the challenges consumers face with financial services. Such challenges lead to a loss of confidence in the financial market, so the Director. Therefore, the duty is of utmost significance, not only to restore trust, but to promote competition and innovation as well.
Arora commended firms for implementing changes to meet the Duty’s requirements but stressed that the work to embed the Duty is an ongoing process. It is not a once and for all checkbox exercise to fulfill the requirements of the FCA. Instead, the Duty should become an integral part of a firm’s culture, requiring continuous assessment, testing, and improvement.
While many firms have embraced the new duty and have simplified their language in communications, improved transparency, and have reassessed their fees with fair value in mind, there are others that still need to understand the true meaning of the Duty. In this context, Mrs. Arora also outlined what firms should focus on moving forward, including reviewing implementation plans, assessing whether changes go far enough, and monitoring outcomes for different consumer groups. She further discussed the importance of the annual board report in assessing and addressing risks or poor outcomes and reminded of the upcoming 2024 deadline for closed products and services, emphasizing the need for firms to prepare and consider potential harm even for products no longer on sale.
In view of (upcoming) regulatory activities of the FCA, the Director emphasized that the Duty is now an integral part in the FCA’s work and the regulator will continue to monitor and intervene where necessary to ensure good consumer outcomes. In fact, the FCA will conduct various surveys measuring firms‘ implementation and embedding of the Consumer Duty across various sectors. Focus will be on addressing specific issues in each sector, such as claims processing in the general insurance sector and fair value assessments in consumer finance. The FCA will also closely examine firms‘ complaints data, particularly identifying areas where the Financial Ombudsman Service upholds a high number of complaints.
Mrs. Arora concluded her speech by expressing the FCA’s commitment to supporting firms in improving outcomes for consumers. She encouraged firms to continue their efforts to embed the Consumer Duty with the goal of increasing consumer confidence and trust in financial services.