Some firms not ready for Consumer Duty, FCA warns
The City watchdog has warned that some firms may not be ready to implement the new Consumer Duty in time, with less than six months to go until the policy comes into force.
The Financial Conduct Authority (FCA) has reviewed a sample of implementation plans and found that many firms are on track to comply with the Duty, which centres around delivering good customer outcomes.
Read more: FCA chief defends new Consumer Duty
However, it also found that some firms are further behind in their planning and said there is a risk that they may struggle to apply the Duty effectively.
The new Consumer Duty was announced on 27 July 2022, and requires all financial services firms, including peer-to-peer lenders, to set higher standards and put consumer protection first.
“The Consumer Duty will bring about a step change in the way financial services firms treat their customers and we welcome the work firms are doing to implement it,” said Sheldon Mills (pictured), executive director of consumers and competition at the FCA.
“Given the scale of the reform, we recognise that some firms need to make significant changes. For firms which are further behind in making the necessary changes, there is time to put that right and for them to show they are acting in the spirit of the new Duty.
“Firms will also see the benefits of the Duty, with increased trust in the sector, more flexibility to innovate and in time fewer rule changes.”
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Most of the firms within the FCA’s sample are larger firms who operate in the retail financial services markets, as the regulator says these are the firms with the greatest potential impact on consumers and markets.
The FCA’s review has highlighted three key areas where firms should particularly focus their attention before the rules come into force on 31 July 2023.
It has urged firms to make sure they are prioritising effectively, with a focus on the areas that will have the biggest impact on consumer outcomes.
Read more: FCA’s Mills reveals his P2P roots in consumer duty speech
It is also telling firms to ensure that they are making the changes needed to ensure good customer service and communication, and that their products and services meet their needs and offer fair value.
Additionally, the regulator said firms need to share information and work closely with their commercial partners to ensure they are all delivering good consumer outcomes. The FCA said it has found that some firms need to accelerate this work to implement the Duty on time.
In the next few weeks, the City regulator will be writing to firms, highlighting its key expectations in relation to implementation of the Duty and some of the key risks and consumer harms that need to be addressed. These letters will be published on the FCA website.
The FCA will also be issuing a survey to over 600 mostly small and medium-sized firms to understand the progress they are making in implementing the Duty.
