The FCA has recently published its priorities under the Consumer Duty. The FCA's Consumer Duty focus covers thematic, multi-firm and market-wide work. It says that its projected timelines may change, for example, because the FCA needs to prioritise new and emerging consumer harms. It says that it will keep these areas under review as pressures emerge on specific sectors or the industry as a whole. It has prioritised initiatives where:
- It believes sharing more information on good and poor practice and its expectations will benefit industry and help drive better outcomes.
- It sees the greatest need to act to address harm – or potential for harm – due to the size or urgency of that harm.
- It requires more data to improve its understanding of the way the Consumer Duty is being embedded.
Based on these priorities, it has identified four focus areas:
Embedding the Consumer Duty and raising standards
It is assessing across sectors how firms are implementing and complying with the Consumer Duty. The FCA wants to understand how firms are improving consumer outcomes. It has three projects under this heading:
- Review of board/governing body reports and complaints and root cause analysis – assessing how firms are responding to the FCA's outcomes monitoring requirements, for example through its review of Board reports and how firms are using insight from their complaints to identify systemic issues and improve business practices.
- Review of treatment of customers in vulnerable circumstances – assessing firms' approach to the treatment of customers in vulnerable circumstances.
- Review of consumer support outcome and supporting informed decision-making – looking at how firms support their customers across the customer journey and how they are using communications to support informed consumer decision-making.
Enhancing understanding of the price and value outcome
The FCA says that firms have found challenges in conducting fair value assessments and have questions about the FCA's expectations. It wants firms to use robust analysis to see if they are offering fair value, and identify and take action where they are not.
Further priorities include:
- Platform cash – treatment of interest of cash balances – tackling concerns about how investment platforms and SIPP operators deal with any interest earned on customers' cash balances. The FCA is engaging with firms where it has concerns.
- Market study into pure protection insurance – exploring consumers' engagement with and understanding of the pure protection insurance products they are buying, the competitive constraints on insurers and intermediaries, and firms' incentives, behaviour and practices. The FCA will begin this in the first half of 2025.
- Unit-linked pensions and long-term savings – looking at transparency of charges across the value chain and how firms assess overall product value. The FCA expects to publish its findings in the summer of 2025.
- Market study into premium finance – reviewing whether people who borrow to pay for motor and home insurance are receiving fair, competitive deals. It plans to publish an interim report in the first half of 2025.
Sector-specific priorities
The FCA has planned work to tackle areas of existing concern in sectors across the rest of this financial year and into the next. Firms should expect a general focus on their implementation and embedding of the Consumer Duty and customer outcomes as part of any supervisory engagement. These include retail banking, consumer finance, payments and digital assets, consumer investments and general and life insurance. Finally, it expects to publish final rules on extending the Sustainability Disclosure Requirements regime to portfolio management in the second quarter of 2025.
Realising the benefits of the Consumer Duty
The FCA published a Call for Input covering wider requirements on retail firms and asking where the FCA can use the Duty to simplify them. The deadline for responses was 31 October 2024. The FCA will set out next steps in the first half of 2025.
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