Regulator also highlights areas of focus for firms in preparation for the new rules
Six months before the Consumer Duty comes into effect, many financial services firms have shown that they understand and embrace the shift to delivering good customer outcomes, the Financial Conduct Authority (FCA) said.
The regulator reviewed a sample of the firms’ implementation plans and noted that a number have established extensive programs of work to comply with Consumer Duty properly.
However, the FCA also found that some firms are further behind in their planning, indicating a risk that they may struggle to apply the Duty effectively once the rules come into force.
“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,” Sheldon Mills, executive director of consumers and competition at the Financial Conduct Authority, said.
“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.”
Over the remaining six months, the FCA, in its review of the implementation plans, said firms must focus on:
- Prioritising, with a focus on the areas that will make the biggest impact on outcomes for consumers
- Making the changes needed so consumers receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it
- Working with other firms so that they can share information and work closely with commercial partners
The Consumer Duty is a vital part of the FCA’s three-year strategy as it is expected to help the regulator set and test higher standards, and reduce and prevent serious harm. Parliament has given the FCA a mandate to introduce the Duty through the Financial Services Act 2021.
The rules come into force on July 31, 2023 for new and existing products or services that are open to sale or renewal, and on July 31, 2024 for closed products or services.
Mortgage executives react to the FCA’s review
Vikki Jefferies, proposition director at PRIMIS Mortgage Network, said it was great to see positive findings from the FCA’s review of Consumer Duty implementation plans.
“It is important to note, that the new Consumer Duty regulations require a combined effort from lenders, networks and providers, each reliant on one another, to ensure strong positive outcomes for consumers,” she added. “With this in mind, the next six months will be crucial for firms to work with their industry partners to iron out any concerns they may have.
“For brokers in a network, such as PRIMIS, regulatory support is provided on an ongoing basis and networks will be interpreting consumer duty requirements and adapting processes and procedures to meet the required ou tcomes.”
Stuart Wilson, chairman at Air Club, said that Consumer Duty reforms would reshape how advisers in the later life market do business, with their own research suggesting that 86% of advisers believe they will need to change their operations to comply with the new regulations.
“At Air, we are committed to supporting advisers in the later life lending sector by providing tools and information to help equip advisers in their journey to Consumer Duty implementation,” he said.
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