31st January 2023
Ahead of the introduction of the Consumer Duty, due to come into force on 31 July 2023 for new and existing retail products and services, the FCA recently conducted a review of firms’ plans to embed compliance with the Duty into their businesses. It has now published the findings.
While acknowledging that many firms are making good progress with their implementation plans, the FCA emphasised that some are lagging behind. Three key areas were identified where firms should focus their attention in this implementation period. The FCA also set out examples of good practice, as well as areas for improvement.
The results of the review will be of interest to all regulated firms in scope of the Consumer Duty; all firms that deliver retail products or services to consumers, or that have a “material influence” over the design, distribution, and preparation of retail products or services. This means that wholesale firms may come within scope if they exercise a material influence over any of the stages in the retail product or service supply chain.
The FCA emphasises that it expects firms to consider the review findings when developing their own implementation plans, and so firms should pay close attention to the points set out below.
Please see our earlier briefing for more information on the Consumer Duty and its substantive requirements.
While acknowledging that many firms are making good progress on shifting the focus to consumer outcomes, and embedding compliance with the Consumer Duty in their business, the FCA highlighted that some are lagging behind with their implementation plans. The regulator identified three key areas where it believes firms should particularly focus their attention in the lead up to 31 July 2023:
The FCA summarised the key review findings by listing examples of good practice, as well as areas for improvement. They provide useful guidance for firms on how they should develop their own implementation plans.
Where firms work with third parties, and where the interdependency with the third party requires scrutiny in light of the Duty, for example where there is a relationship between the manufacturer and distributor of a product, firms should clearly identify the third parties they work with and the nature of the dependency. Plans should include details of how firms intend to engage with third parties in order to ensure compliance.
Implementation plans should show how firms have engaged with the substantive requirements of the Consumer Duty. Firms should be wary of assuming their existing policies, procedures and frameworks are adequate to meet the requirements.
In terms of next steps, among other things firms can expect letters from the FCA, highlighting its key expectations on implementing the Consumer Duty and some of the key risks and consumer harms it’s concerned about in their sectors.
Our consumer finance specialists have a great deal of experience advising firms on their regulatory obligations. They understand the practical challenges involved in creating implementation plans which effectively embed compliance with the Consumer Duty. If you need any advice or assistance in this area, please contact Jeanette, who will be very happy to help.