More than simply the latest in a long line of legislative tweaks, the FCA’s ambitious Consumer Duty represents a paradigm shift in the way consumer protections, oversight and compliance evidencing are managed and regulated across the whole of the financial sector.
The new rules are intended to significantly raise standards of customer care and will require businesses to prioritise the needs of the consumer at every step of the decision-making process, spanning the entire business cycle from product and service design through to customer interactions and complaints handling.
And not only that: the regulator will expect businesses to be able to evidence that they’re adhering to a customer-first approach. It’ll also want to see how any emerging risks are being dealt with promptly and that less-than-stellar outcomes form the basis for meaningful change going forward.
The Consumer Duty, then, signals an evolution from the previous ‘Treating Customers Fairly’ doctrine, encouraging firms to do more than simply avoid causing harm and instead actively work to help customers achieve their financial goals.
Why is Consumer Duty compliance so critical for FCA-regulated firms?
The Consumer Duty is emblematic of the FCA’s new ‘assertive supervision’ approach to regulation, pledging to be more ‘proactive’ – as opposed to primarily reacting to issues that have already occurred – and quicker to intervene in the face of emerging risks when necessary.
The duty’s overarching Consumer Principle mandates firms to ‘act to deliver good outcomes’ for customers, whilst the Cross-Cutting Rules and Four Outcomes set out the FCA’s expectations for behaviour towards consumers and the standards that businesses must strive to achieve, respectively.
But equally significant is the Consumer Duty’s emphasis on a ‘show me, don’t tell me’ approach to regulation, whereby businesses will have to routinely evidence:
‒ They’re clear about what constitutes ‘good outcomes’ for their firm
‒ Good outcomes are being consistently achieved
‒ Lessons are being learned, and improvements are being made, when they fall short
It’s undeniable that these stringent consumer protection rules will look to ensure vulnerable customers are better protected – however, implementing and sustaining this considerable step up in monitoring requirements is sure to present a challenge for even the most dutiful compliance teams.
For example, how can firms be sure they’re able to identify signs of vulnerability when relying on random sampling checks? And how can they be sure they’re treating the root cause of any inefficiencies, not just the symptoms?
Want to learn more? Looking for answers to your Consumer Duty compliance questions?
For expert advice on how to maximise your teams’ capacity and optimise your risk management strategy in the face of ever-increasing regulatory obligations, we invite you to view our exclusive webinar from Monday 31st October.
During this productive session, we outlined the main objectives and thought processes behind the FCA’s Consumer Duty regulations – and assessed what maintaining compliance with these impactful new rules will mean for your compliance processes.
Our panel of compliance experts shared some actionable tips on how you can meet your Consumer Duty oversight and risk monitoring requirements, alongside valuable guidance on building a robust compliance strategy that’s built to last.
The discussion ended with a Q&A session, during which our specialists addressed specific points of interest from attendees.
Watch our webinar on demand for critical insights from our compliance experts – and have your most pressing questions answered!
‘What is Consumer Duty compliance, and why do I need to take action now?’
The panel for this not-to-be-missed session featured:
- Neil Dethick – Consumer Duty Expert and Associate Director at TCC Group
- Garry Evans – Chief Product Officer at Recordsure
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