On 22 February 2023, the FCA published a speech by Sheldon Mills, its executive director for consumers and competition, given at the ‘Countdown to Implementation of the Consumer Duty’ event, on how putting customers front and centre will help the industry innovate.
In his speech, Mr Mills reiterates the importance of the Consumer Duty (Duty) and why the FCA embarked on it in the first place. He explains that the Duty was designed to set and test higher standards and to reduce and prevent serious harm. As an outcomes-based approach, data and monitoring is key and it is hoped this will give firms the impetus to target their customers more accurately through new technologies and systems. The Duty is also intended to reduce customer complaints, cut down costs down the line and boost competition.
The speech also reminds firms of some of the key deadlines, as well as practical steps that they need to take. The Duty implementation deadline for open products and services is 31 July 2023, and 31 July 2024 for closed products. To prepare, over the next five months, firms should share information with their commercial partners and make sure they are on board; this will include the firm’s distribution network and wholesalers as well as retailers and any third parties. Mr Mills also advises firms to focus on the areas that will have the biggest impact on outcomes for customers.
The speech notes that the FCA is in the process of sending out industry-specific letters, which build on the guidance firms already have and help firms understand the FCA’s priorities for embedding the Duty in their business area. Furthermore, the FCA has made a wide range of resources available on their website including their finalised guidance.
Mr Mills flags that the Duty is not retrospective, so it will not mean organisations will be taken to the Financial Ombudsman Service for past actions or omissions so long as they are put right by July 2023 for products or services that are still on offer (or by July 2024 for those that have been withdrawn to new customers). At every stage of the regulatory life cycle, the FCA will ask firms to demonstrate their business models, actions they have taken and how their culture is refocusing on good customer outcomes.
Finally, the speech highlights the need, by the end of April, for manufacturers to complete all reviews necessary to meet the four outcome rules (which relate to the governance of products, price and value, consumer understanding, and consumer support) and to share information with distributors to help them meet their obligations.