Extensive speculation about the final rules for the Financial Conduct Authority (FCA)’s new Consumer Duty has been bubbling across the sector for months. With the FCA’s plans now confirmed, there are important dates for regulated businesses to not only note, but act by too, with the first being just 10 weeks away.
Through the Consumer Duty, the FCA is fortifying its commitment to becoming a more assertive and data-led regulator. By 31st October 2022, it has stipulated that its members’ boards (or equivalent) must have an agreed implementation plan in place detailing how they’ll meet the Consumer Duty’s fundamental principles, with improving customer outcomes at its core.
Nine months later, on 31 July 2023, the Consumer Duty rules will come into force for new and existing products or services. A year later, these same rules will apply to firms’ closed products and services.
Consumer Duty compliance: firms will need to step up their oversight strategy
With this swift and challenging timeline looming, the responsibility for firms to become wholly compliant whilst embracing higher and clearer standards of consumer protection can seem overwhelming.
EY found in a recent poll that nearly 90% of UK firms said Consumer Duty compliance was a top regulatory priority. However, 80% of respondents were concerned about how they can sufficiently evidence good outcomes.
So, what does the Consumer Duty mean for QA teams, and what practical steps can firms take to get ready?
Businesses will be mandated to actively work to ensure their customers achieve positive results from their services. Fair treatment for all is a consistent thread that flows through the Duty’s three new Cross-Cutting Rules:
Firms will be expected to demonstrate these rules across four key outcomes: customer understanding, products and services, customer support and price and value.
Simply put, it’ll be as important to encourage positive customer outcomes as it is to eliminate negative ones.
Olivia Fahy, Senior Product Manager at Recordsure, explains:
“The Consumer Duty is top of the agenda for many FCA regulated firms, as the recent EY poll suggests. With just over ten-weeks until boards will need to agree their implementation plans and maintain oversight of their delivery, it’s an opportune time for businesses to consider how RegTech can help them achieve Consumer Duty compliance and deliver on the Duty’s outcomes.
“The interactions that take place in customer conversations are where many of the risks lie in creating consumer harm, leading to poor outcomes, making post-conversation QA a crucial area of focus for firms to consider under the new Consumer Duty. The FCA has made clear that it wants firms to innovate in the interests of their customers, so rethinking outdated operational practices to eliminate risk and deliver better outcomes is of paramount importance.
“To meet the high standards of the Consumer Duty, 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 – ensuring great customer outcomes.
“Using Artificial Intelligence (AI) powered tools such as Recordsure’s ConversationReviewAI for post-conversation compliance reviews provides firms with the ability to move away from random sampling c.5% of their customer interactions to a targeted, risk-based approach to QA, helping drive improved controls, oversight and automation.
“The FCA is moving towards a ‘show me, don’t tell me’ approach meaning supervisors will want to see evidence of how firms are monitoring and reviewing customer outcomes. QA teams can futureproof their operations and compliance with the introduction of post-conversation Compliance Analytics.”