FCA Review Of Consumer Duty Implementation Plans – The Good And The Bad
27 January 2023
Herbert Smith Freehills
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The FCA's review of firms' progress on implementing
the Consumer Duty contains some important guidance for firms to
follow in the lead up to 31 July 2023.
Key areas to focus on
- Effective prioritisation – firms need to
prioritise appropriately, focussing on reducing risk of poor
consumer outcomes and assessing areas where firms are furthest away
from meeting the Duty.
- Examine the substantive requirements of the
Duty carefully and avoid
over-confidence that existing procedures are sufficient
– the scope of the Duty is extensive and, from our
experience, careful review of the new rules and definitions can
lead to some surprising conclusions.
- Work with other firms in the distribution
chain – the FCA notes a lack of engagement to date
between firms in distribution chains and suggests that this should
become an area of focus. In our experience, this includes working
with overseas firms that are not themselves authorised in the UK
but can affect the ability of UK firms to meet their obligations
under the Duty.
The good and the bad...
Below are headline summaries of a selection from the FCA's
list of good and bad examples. There is a lot of content in the
FCA's review, so we recommend reading in full.
We would be happy to discuss your organisation's
implementation of the Duty, and how the FCA's review may help
inform it – feel free to get in touch.
- Ensure scrutiny of implementation work –
by board, executive, risk and audit.
- Appoint CD Champion (comment: FCA's
comments suggest they see this as effectively a requirement, albeit
with some flexibility for firms to implement as they see
- Organise one-to-one deep dive sessions with
board members on plan deliverables.
- Slow in appointing CD Champion and
sharing the role across the entire board /
- Limited evidence of challenge by the
- Lack of: detail on leadership of programme;
board and committee scrutiny; timeframes for
progress updates; and summary
opinion from risk, compliance or internal audit.
|Culture and people
- People and training programmes e.g. all-staff
and role-tailored training; internal communications campaigns; town
halls; interactive board training.
- Review reward and incentive structures and
performance management frameworks.
- Lack of detail on tangible, practical action
points (comment: culture is an area of the Duty where our
clients tend to have lots of question; think practically about what
programmes could work for your firm).
- Establish, prioritise and map key deliverables
and milestones + consider alignment with other
ongoing initiatives (e.g. vulnerable customers) + identify key
- Adopt a parallel (not sequential) approach to
- Unclear timelines + confused
- Lack of resource planning +
lack of proposed solutions to
anticipated resource shortages.
- Engage with other firms in the distribution
chain and outsource service providers.
- Identify any contracts which
may need renegotiating.
- No identification of key third party
relationships or nature of dependencies.
|Four CD outcomes
- Products and services: One interesting example
was the development of a product-level management dashboard to
measure product performance.
- Price and value: Conduct a full value chain
analysis + improve fair value / product pricing frameworks.
- Consumer understanding: Actions could include
simplifying T&C language + improving call centre scripts.
- Consumer support: Actions could include
shortening call waiting times + widening support channels.
- Plans are too high-level – granularity
is a must.
- Complacency about adequacy of past work +
- Lack of methodology for reviews and gap
analyses to assess products, services, communications, customer
journeys vs. the Duty.
- Lack of clarity around amending existing assessment
frameworks to meet the Duty.
- Identify necessary data for measuring /
monitoring compliance with the Duty.
- Set short- and long-term
strategy to improve data collection.
- Firms assuming they can 'get by' with
repackaging / supplementing existing data.
The FCA's review follows publication of its final rules and guidance in July 2022. Firms were expected to
have their implementation plans in place by October 2022. Below are
some key upcoming dates to pencil in the calendar:
- Soon: FCA to send survey to sample of firms to
assess progress + FCA to conduct targeted engagement with smaller
firms + FCA to issue letters to firms, highlighting expectations,
key risks and consumer harms.
- April 2023: Manufacturers to complete all
reviews necessary to meet the four outcome rules + share
information with distributors.
- To July 2023: Second half of the
- 31 July 2023: Rules apply regarding new and
existing products/services open to sale or renewal.
- 31 July 2024: Rules apply regarding closed
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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