The Consumer Duty: Ten months on

The Consumer Duty has been in place for almost ten months, although it no longer feels like a new requirement but something that has been with us for quite some time, particularly factoring in the implementation phase. That said, from our experience, many FCA and PRA regulated firms are still trying to grapple with what the Consumer Duty means for them in practice and how it impacts their daily regulated activities.

The FCA provided a deluge of information prior to its implementation last July and continues to release publications and statements on the Consumer Duty to guide and help regulated firms. The most recent of these was a new webpage published on 22 February 2024 on good practices and areas of improvement, which can be viewed here. The webpage stresses the need for continual improvement with the need to identify and address gaps on an ongoing basis. The FCA has always maintained that the Consumer Duty should not be an annual tick-box exercise, but something that should be embedded into the culture of the firm.

So, ten months on from its introduction, what should you be doing now?

• All regulated firms are required to carry out their annual Consumer Duty review (checking to ensure they are continuing to carry out their regulated activities in line with the Consumer Duty) before 31 July 2024.
  • As firms are required to continually ensure compliance with the Consumer Duty, this review should act as a type of fail-safe – a way to double-check and ensure that nothing has slipped through the net during the previous 12 months; and that the firm continues to deliver good outcomes to retail customers.
  • This deadline for completing the review is only three months away and, even if there have not been significant changes in your regulatory activities (meaning that, in theory, the Consumer Duty review will be a process of checking that the previous review carried out remains true and accurate), three months is not a long time, particularly given that the completed review will need to be documented and approved by the Board. Before you know it, we will also be heading into summer holiday territory. The key here is not to leave the review and the Board approval to the last minute; start your review process now.

• The FCA views the annual Board report as an important piece of internal governance with Boards having a critical role to play in setting strategy and delivering the Consumer Duty and the right consumer outcomes as part of that strategy. Think about how your Board can work with their people to challenge them and drive them in the right direction to deliver and embed the Consumer Duty. For example, consider reviewing pay and bonus structures to understand what incentivises your people and the impact that this may have on customer outcomes. Think about how you could drive better behaviours and monitor outcomes in an ongoing and effective way so that you are able to evidence the outcomes you are delivering, as well as the gaps and actions you are taking to address these.

• Are you thinking about making any changes to your regulated activities in the next 12 months? If you are, you should be thinking about the Consumer Duty implications of such change from the beginning of the implementation stage. We would recommend documenting how the change in activity still results in the firm delivering good outcomes for retail customers, why this is the case and what the firm has done to mitigate any risks. This document can then be shared with the FCA (should they ever wish to see evidence that the firm has considered the Consumer Duty) and will also make the next annual Consumer Duty review that much easier. 

• Finally, keep an eye out for FCA updates and publications on the Consumer Duty. As mentioned, the FCA's recently published webpage provides useful guidance and insight into what the FCA considers to be good practice. The FCA also has a broader Consumer Duty webpage which it keeps up-to-date with publications and developments. This webpage can be accessed here.

If you would like any assistance with the Consumer Duty, please get in touch with Alan Hughes.