Firms urged to maintain momentum by the FCA

In a speech delivered at a November 2023 event, Ms Arora emphasised that the work to embed Consumer Duty has only just begun; that it is not a ‘once and done’ exercise and – in order to continue to see the benefits – everyone needs to ‘keep a foot on the gas’.

As expected, ‘Consumer Duty will remain a top priority for the FCA in how they make financial services markets work well’, says Ms Arora, as the FCA reinforce that they have positioned Consumer Duty as being ‘central to their transformation to becoming a more assertive regulator with an enhanced focus on how they use data’.

Whilst Ms Arora did acknowledge some good practice seen in the industry, it was reiterated that a great deal of work still needs to be done by firms to demonstrate a clear move away from tick-box approaches to Consumer Duty compliance and to genuinely embed the regulatory change into culture.

Ms Arora also outlined the gulf between firms who are meeting expectations from those who are not, explaining: “Firms who have met our expectations have embraced this shift. Some have aligned their purpose and values to delivering good consumer outcomes, updating internal cultural and training materials to reflect this. And some have reviewed reward and incentive structures and performance management frameworks to ensure they reflect and support delivery of the Duty.”

15. Preparing for your annual board report

As the FCA set out in their rules, at least once a year your board, or equivalent governing body, must review and approve an assessment of whether your firm is delivering good outcomes for your customers. 

• What to include: this assessment should include the results of your monitoring on whether your products and services are delivering expected outcomes in line with Consumer Duty – and any evidence of poor outcomes.
  

• Before signing off: your board, or equivalent governing body, needs to agree the actions required to address any identified risks or poor outcomes and agree whether any changes to your firm’s future business strategy are required.
  

• Why getting it right is important: this assessment will be part of the evidence the FCA use to assess a firm’s ongoing compliance with Consumer Duty. You’ll need to be able to provide it, and the management information that sits behind it, on request.
  

16. What can firms expect from the FCA?

Consumer Duty is now an integral part of their approach and mindset at every stage of the regulatory lifecycle – including authorisations, policy development, supervision, and enforcement. You can – and should – expect it to be a golden thread that runs through all your conversations with them.  

• Expect to be tested: in the coming months, the FCA have stated they will continue their work across all sectors to test firms’ implementation and embedding of Consumer Duty. The regulator recently concluded their second survey measuring small firms' embeddedness of the Consumer Duty and they are planning a third survey in the new year to look at – and address – issues of concern.
  

• Learn from the FCA’s areas of focus: the regulator has sent out letters identifying key issues for firms to consider in each sector or portfolio. These include:
  

  • General insurance: the regulator made it clear that they expect firms to ensure that customers are at the centre of the claims process, so that unreasonable delays to claims processing are avoided and fair claims settlements are made. 

  • Consumer finance: the regulator highlighted that they are looking at some of the products and services provided in the second charge mortgage market. Here, they want to know if, under Consumer Duty, customers are getting fair value. This includes whether fees are representative of the costs incurred by the brokers and lenders.