Like thousands of other people, I joined the FCA’s webinar last week about the next steps around Consumer Duty.
The clear message is that the Consumer Duty is not “once and done”, and firms must continually focus on good customer outcomes, with a big emphasis on the use of existing, and new, data to continue to learn, improve and deliver.
There were two specific areas that were called out by the FCA in relation to the next steps:
1. Closed products
As expected, one of those areas is closed products, as this is the current focus of firms to be compliant with the Duty by 31 July 2024. Firms must ensure that customers with a closed product receive the right support at the right time, that customers are not put in a position of harm or detriment, and that they receive suitable communications and fair value.
2. Board reporting
The second area of focus is the annual Board report. The FCA was clear that there should be evidence within the Board reports that delivering good outcomes is embedded within a firm’s culture and should evidence that firms are on track to deliver their compliance with the Duty for closed products.
In particular, Boards should be able to demonstrate that they are working with Executives to ensure compliance with the Duty, and that data is being used to evidence the delivery of good outcomes. There was an emphasis on this not being a tick box exercise and there will be a focus from the FCA on a data-led approach being used by firms. The FCA will be randomly selecting firms to test and challenge these requirements.
Vulnerability
Vulnerability was also discussed, with examples being provided of good practice by firms. These included wholesale reviews of firms’ business models in their approach to customer vulnerability, systems configuration, centralisation of the vulnerability process, staffing up, outreach campaigns to customers, appointing specialist staff and “turning off” productivity metrics when handling vulnerable customers.
There are some weaknesses that have been observed in the vulnerability process, and these include the ability to track vulnerable customers, gaps in data and gaps in systemic controls.
What should firms do next?
One of the key takeaways for me, and a potential area of concern, was that many firms may not be prepared for the 31 July 2024 deadline and are struggling more with their compliance for closed products than they did for open products.
The two main areas, in my opinion (they are obvious really), that firms will struggle with, in being ready for the deadline, are technology and data. Look out for upcoming articles from Arum which will help you with these.
We can assist you in ensuring you’re compliant with Consumer Duty. Arum has over 25 years’ experience helping organisations to improve their collections and recoveries, including regulatory compliance. If you’d like to discuss anything related to Consumer Duty, please feel free to contact me directly.
Read our comprehensive guide to Consumer Duty
About the author
Nick Walsh
Principal Consultant
Arum
Nick is a collections and recoveries professional with over 30 years’ experience, domestically and internationally. He has enabled many organisations, large and small, across multiple sectors, to fast track to an optimal operating model designed specifically for each organisation, taking into account their constraints and with due regard to regulatory compliance and customer experience.