Webinar recap: What is the FCA’s approach to enforcing the Consumer Duty, and the role of smart data

On 16th November, our resident compliance experts hosted the second in our three-part series of webinars centred around the FCA’s Consumer Duty initiative.

In part one, we took a whistle-stop tour of exactly why the Consumer Duty is as important as advertised and the host of challenges awaiting firms on the road to compliance.

For the follow-up, we delved deeper into why the new rules shouldn’t be mistaken for just ‘Treating Customers Fairly (TCF) on steroids’ and why firms can’t afford to be caught asleep at the wheel with keeping up their end of the bargain.

The host, Recordsure’s Chief Product Officer Garry Evans, was joined by Ex-FCA and now Senior Product Manager at Recordsure, Olivia Fahy, and TCC’s Associate Director Neil Dethick. Our panellists answered the questions on everyone’s mind: how will the new standards be monitored and enforced?

So, what did we learn during round two?

Point 1: The FCA is serious about demanding more from firms

By requiring firms to clearly show how they’ll be implementing the Consumer Duty, the FCA signalled right out of the gate that it’s expecting firms to buy into the initiative and deliver on the promises it makes to customers. In fact, the regulator has already asked several firms to present their Implementation Plans for scrutiny over the coming weeks. So, it’s clear these aren’t just a tick box exercise – businesses will be monitored on their progress over the coming months.

With this in mind, everyone within the organisation should now be aware of the Consumer Duty and be on the same page about their direction of travel. Staff should be made aware of the main changes to processes and policies that will be taking place between now and July 2023, with working groups busy drilling down into the detail of what, when and how actions will be taken to align with the rules.

In terms of supervision, the FCA is taking a portfolio approach where firms will be grouped according to sector and business model. It will then draw up a bespoke, outcomes-focused strategy for each grouping to address their different risk profiles.

All is well and good so far – but how will the FCA actually verify the standards are being met?

Here comes the tricky part: compliance checks will be embedded into the regulator’s existing supervision practices – meaning there won’t be dedicated ‘Consumer Duty’ audits as many may have assumed. For larger ‘fixed’ firms, their named supervisors will regularly gather outcomes information as part of their standard oversight activities, while smaller firms are likely to be monitored as part of specific issue-focused, multi-firm checks.

Of course, the challenge here is that there won’t be any assigned test you can wait to be examined on or prepare for ahead of time. Instead, every touchpoint with the regulator will feed into Consumer Duty compliance, and so it’ll require constant effort and diligence across all aspects of the business.

Point 2: This isn’t a ‘boy who cried enforcement’ situation

Despite all the fanfare, it’s been noted that there doesn’t seem to be a sense of urgency to prepare for the legislation among many organisations. And this largely stems from a feeling that, tough talk aside, the FCA won’t actually take steps to police it once it’s underway – as happened with the previous TCF regime.

But the key difference that bears repeating is that TCF was mainly principles-based guidance, whilst the Consumer Duty is a full regulatory overhaul made up of hard and fast rules. It’s a fundamentally different beast, and the FCA has repeatedly said firms will not be getting away with a slap on the wrist this time around.

It’s also true that the FCA itself has come under scrutiny in recent years for not being proactive enough. This has led some commentators to see the Consumer Duty as partly an attempt to reboot its image and do good on its word to be more interventionist. So, what’s the key message for firms?

For starters, the Consumer Principle, Four Outcomes and Cross-Cutting Rules are non-negotiable and serious breaches will be met with penalties – either via interventionist powers, fines or remediation. For lesser offences, supervisory enforcement or increased regulatory scrutiny – for example, Section 166 investigations – are also on the table, and the reputational and financial risk of these shouldn’t be underestimated.

On a final common-sense note, the FCA simply can’t afford to let a culture of apathy take root within financial services – and so all signs point to the regulator coming down hard on firms who don’t get with the programme.

Point 3: Data collection is your ticket to sustainable improvements

It’s flown under the radar a bit, but the FCA has confirmed it’s looking for firms to have a workable data strategy within their Consumer Duty game plan. It’s also revealed that any new firms looking to be authorised will need to factor in data usage, and how that relates to evidencing, as part of their compliance framework.

If you’ve been paying attention so far this shouldn’t come as a surprise, as the FCA has talked a lot about wanting to become a ‘data-led’ regulator going forward. But it does mean you’ll need to think long and hard about how you’ll be using data – and the tools you’ll need for the job – to monitor vulnerability, conduct risk and customer outcomes.

It’s also important to point out that the Consumer Duty is here for the long haul, and so firms should be taking a long-term lens to these issues. What do we mean by this?

For one thing, it means focusing less on the 31st July deadline that’s understandably taking up the lion’s share of discussion at the moment, and more on how data can help drive best practice, Duty compliance and lay the groundwork for a customer-first culture in the years to come.

In other words, the implementation date isn’t the finish line, it’s a starting line – and so you should approach the data question with an eye on driving sustained positive change for the future.

Need help delivering your Consumer Duty compliance monitoring and evidencing? Looking to better your data strategy? Get in touch!

AI can help navigate the Duty jungle

AI can help navigate the Duty jungle

Heavy lifting upfront

The phased Duty deadline is on track and the FCA is keen to encourage openness and embrace a pragmatic approach as things develop. The hard work firms are committing to now should mean fewer reactive rules form the FCA in the future.

Industry innovation

Nikhil continued that “the Consumer Duty can help shape a framework for use of Artificial Intelligence (AI) and other new technologies”.

But how can AI help shape your Duty strategy? By embracing RegTech solutions to monitor and evidence consumer outcomes, firms can switch to a more efficient, more sustainable way of working. Spotting the signs of vulnerability and tailoring products to individual needs are all high on the Duty checklist. Couple this with receiving and reviewing accurate customer feedback and data, it’s clear to see how AI will be an integral cog in the Duty machine.

Invest in AI

As Olivia Fahy, Recordsure’s Senior Product Manager recently put it “Firms can either invest in more people or invest in tech to create efficiencies that enable their people to spend their time more productively on what matters.” Using AI-powered tools such as Recordsure’s unique platform for QA compliance reviews means firms can move away from the more traditional random sampling form of quality assurance reviews. Businesses can now futureproof their approach by embracing the actionable insights that AI tools provide to increase the efficiency and effectiveness of their QA teams and ensure consistency of QA reviews. And get Duty ready to monitor for compliance and evidence customer outcomes.
Download our whitepaper to explore how AI-enhanced RegTech can make relying on a random sampling approach to compliance reviews a thing of the past – and introduce simplified audit trails with 100% oversight of all client interactions.
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Welcome new talent and diversity into the world of RegTech: Happy #STEMDay 2022!

8th November marks Science, Technology, Engineering and Mathematics (STEM) Day – and we’re celebrating!

Founded in 2015, STEM Day highlights the achievements of those leaving their mark within these vital disciplines and inspires the next generation to get involved with science and tech-based careers.

But more specifically, STEM Day also seeks to promote the continued diversification of our sector, which despite good progress being made in recent years, still finds women and minorities underrepresented within its ranks.

For example, recent research has highlighted how men outnumber women two to one in the FinTech sector – and amongst the women working in the industry, only 13.5% are from minority ethnic backgrounds.

Why does diversity in STEM matter?

We, at Recordsure, believe that those at the forefront of the FinTech and RegTech spheres have the responsibility to show that women and those from underrepresented backgrounds are welcome and valued within the industry – and that the culture is shifting for the better.

Because at the end of the day, it’s only by doing so that we can expand the conversation, invite new diverse voices and ideas, and inspire the most capable technology professionals to join our exciting industry.

Wishing everyone a happy #STEMDay – here’s to a brighter future!

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Webinar recap: Three things we learned about Consumer Duty compliance

On 31st October 2022, we kicked off an exciting three-part webinar series on the FCA’s Consumer Duty with our first instalment.

We partnered with BSA and TCC to launch our new webinar series on all things Consumer Duty. Our first of three sessions, ‘What is Consumer Duty compliance, and why do I need to take action now?’ offered an insightful guide to the FCA’s Duty.

The panel of Duty specialists was hosted by Recordsure’s Programme Manager, Adeline Han and featured Garry Evans, Chief Product Officer at Recordsure, and TCC’s Consumer Duty expert and Associate Director Neil Dethick.

During the session, our specialist trio broke down the whats and whys of the new rules. We delved into why it’s so important for firms to take these increased consumer care standards seriously – and of course, gave some actionable tips on how you can show the regulator you’re really doing your bit.

So what were the main takeaways?

The Consumer Duty: what’s all the fuss about?

As well as being spookiest day of the year, financial services firms will know that 31st October 2022 marked the first significant milestone on the FCA’s Consumer Duty roll-out. From this point on, businesses need to have their implementation plans finalised, Board-approved and ready for inspection by the FCA.

In other words, firms should have decided by now how they’re going to align their compliance strategy and internal processes with the new regulations. And they need to have answers to basic consumer-centric issues like what a ‘good outcome’ looks like for their customers – and by extension, how this can be reliably measured and evidenced.

Businesses now have until 31st July 2023 to ensure their new and existing products and services are compliant with the Duty’s standards. And then until 31st July 2024 to ensure the same for their closed products and services. This means firms need to be looking very closely at their portfolio and make changes or adjust processes if necessary.

As the Consumer Duty covers almost every aspect of the business lifecycle, right from product design through to client interactions and complaints handling, getting it right long term is going to need a thorough consideration of your approach to customer care at each of these stages.

Point 1: The Consumer Duty isn’t just business as usual – no matter how diligent you’ve been before

It’s true that most businesses already think they’re doing right by their customers. But the reality is that the old guidance many firms are still working to, and the new requirements the FCA has laid out under the Consumer Duty, translate to two very different standards of care.

For instance, the FCA has reported that it commonly finds information being presented in a way that’s misleading or difficult for many consumers to understand properly. Products and services that either don’t offer fair value for money or otherwise offer little in the way of tangible benefits are still being sold to customers.

And it’s exactly these types of issues that the new rules are looking to address. Indeed, far from just being Treating Customers Fairly (TCF) with a new coat of paint, the Consumer Duty signals a new approach to delivering good outcomes and aims to put customers at the heart of every decision that gets made within financial services.

Far from just being Treating Customers Fairly (TCF) with a new coat of paint, the Consumer Duty signals a new approach to delivering good outcomes and aims to put customers at the heart of every decision that gets made within financial services


But not only that: it’s also the clearest statement of intent we’ve had so far regarding the FCA’s shift towards a more proactive, ‘assertive supervision’ model of regulation.

Point 2: The Consumer Duty isn’t just TCF by another name – and business leaders need to get onboard, sooner rather than later

Put simply, it can’t be stressed enough how the Consumer Duty and TCF are completely different initiatives – both in scope and in structure.

For one thing, TCF primarily took the form of principles-based, best-practice guidance meant to help businesses achieve positive results for their customers. The Consumer Duty, meanwhile, is backed by a rigid set of enforceable rules – and so there’ll be much less regulatory wiggle room this time around.

Unsurprisingly, then, the duty will place much more emphasis on outcomes than previous FCA agendas. It’s also backed by strict monitoring and testing requirements – alongside enhanced oversight responsibilities for Boards – to ensure good outcomes are consistently delivered and that firms are continuously taking positive steps towards improvement where needed.

Beyond that, the Consumer Duty marks a step up in terms of governance standards, meaning senior managers and executives will be responsible for maintaining compliance – and directly answerable for what goes on under their watch. At the end of the day, when it comes to outcomes and obligations, the Board and management teams will be accountable for the Duty compliance come August 2023.

These higher standards are also reflected in the new Conduct Rule 6 – mandating firms to ‘act to deliver good outcomes’ for customers – which in layman’s terms means it’s no longer enough to simply do no harm. Under the Consumer Duty, firms, including mortgage providers, must be proactive in making sure consumers receive the best possible results from their products and services, while monitoring and evidencing the conversations.

Point 3: There’s a lot of work to be done (and not a lot of time to do it!)

While every firm will inevitably have its own strengths and weaknesses when it comes to getting Consumer Duty ready, our conversations with clients have revealed a few common areas of concern.

First and foremost, Price and Value outcome: what constitutes fair value, and how can this be quantified? The duty’s focus on proportionality means firms will have to take another look at their charging structures – and this will be extra critical in cases where they’ve charged flat fees until now.

As a quick example, take a 10% flat rate on a mortgage. This would cost £10,000 for a £100,000 loan but exponentially more for a £1m loan – under the new rules, this becomes extremely difficult to justify without proving the larger mortgage required your staff to complete 10 times the work. 

Consumer Understanding outcome, meanwhile, has also been causing some headaches. Because for starters, how can firms be sure their customers genuinely understand the information presented to them? How can this be accurately tested, and how often should these audits be carried out? And finally, given that customers’ financial situations and priorities change over time, how far should businesses go to ensure their customers still grasp the implications of their long-term arrangements?

What’s more, some firms are struggling to grasp how they’ll increase their monitoring and supervision to fit the lofty new standards.

For instance, what kind of MI is needed for these new checks? How can this data be compiled when we need it? How much can we rely on it to tell the whole story? What kind of processes and compliance tech firms need to address the gaps in conversation monitoring and evidencing?

And on a more fundamental note, how can the lessons learned translate to effective policy or process change?

Recordsure collaboration with Grant Thornton News

Recordsure and Grant Thornton strategic collaboration to transform customer conversation monitoring

News Release

We’re delighted to announce a new collaboration with leading professional services provider Grant Thornton to support Consumer Duty implementation and compliance across the UK financial services industry. This strategic collaboration is set to transform customer conversation monitoring for FCA‘s Consumer Duty compliance.

Consumer Duty: transforming customer conversation monitoring

Leverage artificial intelligence and machine learning to achieve regulatory requirements

Financial services businesses need to focus on ensuring positive consumer outcomes. Increasing pressure on consumer finances is adding to the higher standards required by the FCA’s Consumer Duty. 

The new regulations stipulate ongoing monitoring of retail customer outcomes. You must monitor key elements and set up continuous feedback loops into governance forums to ensure these standards are achieved, and that appropriate action is taken if not. Reliance on random sampling of customer conversations doesn’t provide sufficient oversight to be confident of Consumer Duty compliance. 

To help you enable this monitoring, we’re collaborating with Recordsure on a new service that makes it easier to get the right quality assurance processes in place. This service brings together our own expertise in data, regtech, automation, and digital transformation with Recordsure’s market-leading artificial intelligence.

Oversight of all customer conversations

Random sampling of customer conversations throughout the customer journey isn’t a reliable quality indicator – and presents a significant hidden conduct risk, both at individual and systemic levels. It’s not an acceptable approach when there are viable solutions available for detecting harm.

Strategic data-driven AI and machine learning

Working together, we’ll enable regulated financial services organisations to automate oversight of all customer conversations and support subject matter experts to review identified risks. Implementing compliance analytics to highlight and better understand non-compliant conversations directly feeds into individual and team coaching, and improves customer outcomes by helping to identify possible systemic issues.

Niresh Rajah, Head of Data, RegTech & Digital Advisory Practice at Grant Thornton UK LLP comments on the strategic collaboration.

Ensuring firms are able to discharge their consumer duty obligations is a complex set of activities and requires a data driven approach underpinned by sophisticated machine learning and artificial Intelligence tools and techniques. This exciting collaboration allows us to support our financial services clients through the Consumer Duty journey by combining our data management, data analytics regulatory change and regtech expertise and experience with Recordsure’s leading machine learning platform

Niresh Rajah, Grant Thornton UK LLP

Adrian Crean, Partnership Director at Recordsure and TCC Group is thrilled about this new strategic collaboration and looks forward to working with Grant Thornton and bringing more benefits to our clients:

We’re thrilled to launch this new strategic collaboration with Grant Thornton. Both organisations, Grant Thornton and Recordsure, have a strong belief in fair customer treatment, and conviction in helping our clients power their regulatory and consumer oversight obligations with market-leading technology and data, to deliver better customer outcomes.

Adrian Crean, Recordsure and TCC Group
Adrian Crean-Recrodsure-Partnership-Director

Find out more about this collaboration and the efficiencies our Compliance Analytics AI solutions can bring to your Quality Assurance teams.