[INSIGHTS] : FCA Consumer Duty Summary

The deadline for the FCA consumer duty is looming, July 31st and there is plenty to do. This is a summary of the original guidance from the FCA, containing the rules for compliance. You can access the full document below.

https://www.fca.org.uk/publication/finalised-guidance/fg22-5.pdf


Summary

This provides guidance for firms on complying with the Consumer Duty, emphasizing the importance of consumer support, designing products and services for the target market, and avoiding unreasonable barriers.

It covers key considerations such as identifying the target market, addressing the needs of vulnerable customers, providing clear information, and acting in good faith to enable customers to pursue their financial objectives.


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Key Summary Points

  • Firms must provide consumer support throughout the customer journey.
  • Products and services should be designed to meet the needs of the identified target market.
  • Regular reviews are necessary to ensure ongoing alignment with the target market’s needs.
  • Firms should consider the needs of vulnerable customers and support them accordingly.
  • Unreasonable barriers, such as complex processes or sludge practices, should be avoided.
  • Clear and transparent information, including terms and conditions, must be provided to customers.
  • Firms should act in good faith, avoid causing harm, and enable customers to pursue their financial objectives.
  • Continuous improvement of processes is essential to meet the requirements of the Consumer Duty.

Key Statistics

  • The 2020 Financial Lives Survey found that 46% of UK adults exhibited one or more characteristics of vulnerability.
  • Data highlighted that minority ethnic adults were disproportionately likely to be in vulnerable circumstances.
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Key Takeaways

  1. Firms should prioritize providing consumer support throughout the customer journey.
  2. Designing products and services that meet the needs of the target market is crucial.
  3. Consider the needs of vulnerable customers and take steps to support them.
  4. Avoid creating unreasonable barriers or sludge practices that hinder customers from taking necessary actions.
  5. Provide clear and transparent information, including terms and conditions, to customers.
  6. Act in good faith, avoiding harm, and enabling customers to pursue their financial objectives.
  7. Continuously review and improve processes to align with the requirements of the Consumer Duty.

Key Areas for Compliance Focus

  • Firms must prioritize consumer support throughout the entire customer journey.
  • Products and services need to be designed that align with the needs, characteristics, and objectives of the target market.
  • Regular reviews should be conducted to ensure ongoing alignment with the target market’s needs.
  • Consider the needs of vulnerable customers and develop appropriate strategies to support them.
  • Provide clear and transparent information to customers, including terms and conditions, fees, and potential risks.
  • Act in good faith and avoid causing foreseeable harm to customers.
  • Enable customers to pursue their financial objectives by removing unreasonable barriers.
  • Implement effective communication channels to address customer queries, concerns, and complaints promptly.
  • Employ inclusive design principles to meet the diverse needs of customers, including those with characteristics of vulnerability.
  • Consider the impact of product complexity on customer understanding and ensure adequate information is provided.
  • Engage with customer representatives and conduct focus groups to gain insights into customer needs and preferences.
  • Align product pricing with fair value, avoiding overpricing or practices that exploit customers.
  • Monitor and assess customer outcomes to identify areas for improvement and address any disparities across customer groups.
  • Continuously improve processes, incorporating customer feedback and market insights.
  • Ensure products and services are compatible with applicable laws and regulations, including the Equality Act or equivalent legislation.
  • Strive for simplicity in customer interactions and minimize unnecessary friction in processes.
  • Provide adequate support during digital interactions, ensuring clear instructions and reliable assistance.
  • Avoid misleading or deceptive practices and ensure customers have access to accurate and reliable information.
  • Assess the impact of product termination or account closure on customers and avoid imposing unreasonable exit fees or charges.
  • Foster a customer-centric culture within the organization, empowering employees to prioritize customer outcomes.
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All of this will need to be evidenced too.


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