Since Consumer Duty came into effect only 8 weeks ago, the FCA have already issued several ‘Dear CEO’ letters telling firms to step up.
Fund managers have been told further work is needed on their value assessments and the proficiency of non-executive directors. Retail bank account closures and the treatment of PEPs continue to be scrutinised. Insurers have been instructed to do better on fair value of products across all sectors, but especially and immediately for GAP (guaranteed asset protection) car insurance. On the latter, the deadline for firms to actively demonstrate compliance to the FCA is short, just 12 weeks before the FCA will intervene.
These are clear indicators that the FCA is in a hurry to prove Consumer Duty is real, and that enforcement starts now. There is no grace period. For FCA regulated firms with a retail touchpoint, the switch from building a Consumer Duty programme, to execution, output, monitoring, review, governance, and pro-active remediation if required, should be happening now.
Those responsible for driving in-house Consumer Duty programmes need to be closely evaluating the detailed output, continuously. Boards need to ensure that this is on the agenda now; and that the designated Consumer Duty Champion is fully briefed as to their responsibilities. Independent non-executive directors must get themselves trained if necessary, and actively participate and challenge what is put before them. Boards also need to assess how their business strategy is consistent with delivering good outcomes under the Duty.
Board-level Consumer Duty reports need to be tangible and comprehensive, with multiple metrics to evidence conclusions. By way of reminder, Chapter 11 of the FCA’s guidance is a good reference point for what should be included:
Business persistence, i.e. analysis of customer retention records
Distribution of products/pricing and fees and charges
Customer behavioural insights
Staff training and competence records, including remedial actions
Customer file reviews, including assessments of outcomes
Numbers of complaints, including trend analyses
Complaints root cause analysis
Results of the regular testing and monitoring required under the outcome rules
Feedback from other parties in the distribution chain
Researching or testing customer experiences through processes such as mystery shopping, auditing customer journeys, focus groups and deep dives, or working with consumer organisations to gain insight into the needs and experiences of consumers
Reviewing whether processes and policies are effective in delivering good outcomes for customers
Drawing on external sources of data about consumer outcomes such as The Financial Lives survey
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