Key insights from the Consumer Duty feedback

The upcoming Consumer Duty poses new standards for financial firms and raises expectations in terms of providing benefit-focused outcomes to customers. Preparing for the Duty is no small task and requires firms to transform various aspects of their operations, including the way they support customers, the balance of price and value of products, and delivering transparency at all levels. 

A notable expectation of the new regulations is the greater level of governance, where firms are responsible for monitoring and reporting their own performance in providing their customers with benefit-focused outcomes. This layer of self-governance caused concerns over how businesses are expected to show accountability to the FCA.

In light of the changes presented by the Duty, many firms and organisations have inevitably had questions regarding the intricacies of the new standard and how it affects them individually. In response, the FCA engaged with a range of firms, organisations and other regulators to acquire feedback which resulted in the creation of Feedback to CP21/36 and final rules. In this article we delve into the FCA’s Consumer Duty feedback, focusing on three core areas.

Implementation timetable

Query: Initially, the implementation period of the Duty had a deadline of 30 April 2023. Respondents provided feedback that the short implementation period is highly challenging, and could pose potential operational and execution risks for firms trying to meet the short deadline. 

Feedback: FCA have stated that they want the duty to be in effect as soon as possible so that customers can enjoy the benefit-focused outcomes it aims to provide. That said, they recognised the challenges and extended the deadline with a phased approach; Firms will now need to apply the Duty to existing products/services by July 31 2023, whereas closed products/services have until July 31 2024. 

Governance and accountability

Query: Various respondents requested clarity on what the Duty requires in terms of governance and accountability within financial firms; this was especially prevalent in the case of using third-party providers for specific applications such as customer verification. 

Feedback: The FCA has since amended the guidance relating to governance and accountability in the Duty. It includes examples of when to use data and the situations where the FCA expects a thorough and regular monitoring process. In regards to third-party providers, the authorised firms are still responsible for meeting the Duty’s standards. This means firms must have agreements with third-parties to ensure accountability for providing benefit focused outcomes for customers. 

Supervision, monitoring and evaluation

Query: As monitoring and evaluating customer experience is pivotal in ensuring compliance with the Duty, respondents asked for further detail about what compliance looks like, as well as timetables of review to the Duty’s requirements

Feedback: The FCA provided further clarity; for fixed firms, there will be a dedicated supervision team that will regularly review implementation plans of the Duty. After implementation, they will assess firm’ compliance and how they monitor the customer experience at regular intervals. The FCA will also provide additional guidance and support to firms that need it to help them achieve compliance before the deadline. 

Key takeaways from the feedback

The FCA’s feedback to the above queries and the various other firms and organisations had shown a clear incentive to help firms achieve the Duty so that customers can experience the benefit-focused outcomes it aims to achieve. This is proven by the adjusted deadlines, further clarity and additional support it is offering to help individual firms meet the target date. 

In addition to the clarity presented by the FCA, they outline security related factors and how firms should manage them, which goes as follows; “It is likely that firms will need a real-time human interface, such as a phone service, to deal with some of these issues and provide effective support to customers.” This statement, in parallel with the Duty’s standard of third-party firms meeting the products and services outcome, affirms the benefit of integrating a dedicated platform to manage customer verification, data monitoring and ML. 

Integrate Consumer Duty compliance ahead of the deadline with Bonafidee 

Bonafidee’s advanced tools provide firms with the necessary security, monitoring and configurable features to ensure compliance with the Duty ahead of the deadline. We provide a rigorous yet easy-to-use ID verification suite, irrefutable electronic signatures, and an auditable evidence pack that will ensure you have satisfied your KYC requirements and are able to prove good outcomes. Moreover, our platform provides the evidence that your customers have had the best outcomes delivered through a consistent process, every time.

Download our guide to explore Bonafidee’s comprehensive Consumer Duty solution that enables firms to meet and exceed the upcoming regulations.