Why firms need to be challenging themselves on price and value
Last week Consumer Duty expert and TCC’s
Host, Recordsure’s Chief Product Officer Garry Evans, was joined by Ex-FCA and now Senior Product Manager at Recordsure, Olivia Fahy, alongside our guest speaker Neil. The session explored why the new rules go well beyond ‘Treating Customers Fairly’ (TCF) and how these regulatory changes should not be underestimated.
Catch up on the full webinar here:
The discussion highlighted important points about the FCA’s expectations from firms, which we’ve summarised into three key Duty preparations.
The regulator has already asked several firms to present their Implementation Plans for scrutiny, so it’s clear businesses will be monitored on their progress over the coming months.
The time is now to make all colleagues aware of the main changes to processes and policies that will be taking place until July 2023, as tasked working groups should continue detailing 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 administer a bespoke, outcomes-focused strategy for each grouping to address their different risk profiles.
But how will the FCA verify that their standards are being met?
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, whilst smaller firms are likely to be monitored as part of specific issue-focused, multi-firm checks.
There won’t be any assigned test you can be examined on. 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.
Inevitably comparisons have been drawn between the Consumer Duty and the existing TCF regime, but there are fundamental and critical differences in their styles of regulation along with the rigour of rules and enforcement.
TCF is mainly a principles-based guidance, whilst the Consumer Duty is a full regulatory overhaul made up of a consumer principle, cross-cutting rules and four outcomes. It’s fundamentally different and the FCA has repeatedly said firms will face stringent penalties for non-compliance.
It’s also true that the FCA 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 reposition the regulator as an interventionist.
Consumer Duty regulations 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 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 comply.
The FCA has confirmed it’s looking for firms to have a workable data strategy within their Consumer Duty plan. 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.
Firms will need to consider how they’ll be using data – and the tools needed for the job – to monitor vulnerability, conduct risk and customer outcomes.
It’s also important to note that the Consumer Duty is here for the long haul, and so firms should be compiling suitable strategies to reflect this.
The 31st July 2023 deadline for new and existing products to become Duty compliant is a date at the forefront of many minds. However, approaching this date as a starting point to drive positive future change is a productive perspective, to encourage firms to embrace a customer-first culture for years to come.
Register now for Recordsure’s final webinar in the series in partnership with the BSA on 7th December at 2pm. The panel will discuss ‘ Consumer Duty: What drives the ‘show me, don’t tell me’ approach and how to evidence compliance’. Reserve your space now.
Want to learn more?
Take a closer look at the FCA’s Consumer Duty initiative with our additional insights: