On 16 May 2024, the Financial Conduct Authority (FCA) published six ‘Dear CEO’ letters, setting out information to support firms in their final preparations for implementing the Consumer Duty for closed products and services. This is ahead of the implementation deadline on 31 July 2024. The letters are addressed to the CEOs or Directors of: 

The letters set out:

  • The application of the Duty to closed products and services.
  • Priority issues that are particularly acute or widespread in closed products and services.
  • Action prompts to ensure firms are prepared for the 31 July 2024 deadline for closed products and services. These set out more specific objectives, tailored to the type of firm the letter addresses.  (The FCA reminds firms that its website gives examples of good and poor practices for open products and services.)
  • A reminder, in Annex 1 to the letters, of the definition of closed products and services and an overview of the rules.

The priority areas highlighted in the letters, for firms to consider before the deadline for implementation, are:

  • Gaps in firms’ customer data.
  • Fair value.
  • Treatment of consumers with characteristics of vulnerability.
  • Gone-away or disengaged customers.
  • Vested contractual rights.

The FCA notes that when the Duty comes into force for closed products and services, firms will need to ensure – and be able to show the FCA – that they are acting to deliver good customer outcomes. The FCA says it will take an approach that is proportionate to the harm (or risk of harm) to consumers, prioritising the most serious breaches and acting swiftly and assertively.

Next steps

The FCA expects firms’ senior management to carefully consider the contents of the letters and ensure their firm is compliant with the Duty by the deadline. It acknowledges that firms in some sectors may have no or very few customers with closed products and services, but notes that it is circulating the letters widely to help firms consider broader distribution chains.

Any firms that do not think they will be substantially compliant by the July 2024 deadline, and/or that have any significant issues come to light, are asked to contact the FCA via their normal supervisory contact as soon as possible. Further details of the FCA’s expectations for any areas of non-compliance are set out at the end of each letter.

Boards will need to satisfy themselves that their firms have prepared adequately for the 31 July 2024 implementation deadline.