Next steps on the Consumer Duty

We are now into the seventh month since the implementation of the Consumer Duty. We know that many firms continue with their efforts and focus on meeting the requirements of the Duty and achieving improved consumer outcomes.

No doubt firms will agree that it has been an intensive journey thus far. It was always meant to be about delivering continuous improvement in customer outcomes, but now is also an appropriate time to remind firms of the upcoming requirements as to the next steps in that journey.

We specifically refer to two requirements which should be addressed by 31^st July 2024.

The first year of the Consumer Duty implementation focused primarily on new and existing products/services that financial services firms offer to retail customers. Closed products (i.e. products/services that are no longer marketed or sold, but active arrangements still exist) were due to be brought into scope a year later than new and existing products. That deadline is 31^st July 2024.

Some firms will have already progressed work in this area and will be well on their way to complying with the requirements for closed products, when they are brought into scope. However, for those firms that still need to carry out additional work in respect of their closed products, there is still time to ensure that you have addressed the requirements by the end of July.

The next requirement is in relation to firms’ annual board reports. The FCA’s Policy Statement also sets requirements for firms to produce annual board reports for the board (or governance body) enabling the board/body to assess their compliance with the requirements of the Duty and whether they are achieving good consumer outcomes.

Annual board reports should comprise of data and insights (MI) from all areas of the business (i.e. product design/development, marketing, sales, customer service, complaints etc) to provide an overall view of the firm’s compliance with the requirements of the Duty. Reports should also enable the board/governance body to identify where good/intended outcomes are not being achieved, allowing it to act to address any harm (or potential harm) being caused to consumers.

Evidently, thorough, in-depth MI is key to developing an annual board report that will serve sufficient purpose for the board/governing body to meet its requirement to assess compliance and address harm. Many will have made sufficient progress in the data and MI they have collated over the course of their implementation journey, but firms should now be thinking about compiling the collective MI aspects into a board report fit for purpose.

Remember, annual board reports and any actions on the back of each annual report need to be documented and retained for evidence. The FCA has previously stated that such evidence should be readily available, if the regulator feels the need to request it.