Steve Burch, Group Head of Compliance
New Consumer Duty regulations are coming. The FCA has confirmed that the rules will be introduced on 31st July 2023 for ‘new and existing products or services that are open to sale or renewal’. For closed products or services, the rules come into force on 31st July 2024.
However, there are earlier deadlines to consider. The first is 31st October 2022, by which time all regulated firms should have an implementation plan in place that has been signed off at Board and Senior Management levels. This should include a proposed suite of MI and gap analysis that focuses on identifying and documenting where risks of harm and poor outcomes might arise, and how those risks have been or will be mitigated.
The FCA says the regulations will fundamentally improve how firms serve consumers, setting higher and clearer standards of consumer protection across financial services and requiring firms to put their customers’ needs first and deliver good consumer outcomes.
Consumer Duty should not be mistakenly compared to TCF for those who believe that their firms are already engaging in a satisfactory level of consumer care. The new Duty clearly sets out additional expectations to achieve a more comprehensive and holistic approach in terms of company culture and the provision of better communication and clearer information, understanding client types and their respective needs, specifically tailored advice solutions that incorporate wider fields of requirements and the delivery of laser focused signposting in area’s that may have had less emphasis previously.
So, what does this mean for you?
Under Consumer Duty, you have to act in good faith with your customers if you or your firm does not offer a particular type of product or service. If, for example, a regulated bridging loan or second charge will potentially deliver the best possible outcome for the client and you don’t provide advice in these areas, you must clearly understand your deficiencies and provide clear signposting regarding these options and refer them to someone who will be qualified to help them.
This puts much greater emphasis on Directly Authorised firms, IFAs, and Networks to consider their specialist lending partnerships and how they will leverage those partnerships to fill gaps in their own offering.
It also puts increased focus on how firms choose their distributors, mortgage clubs, lenders, and product partners, based on their reputations and the services and value they offer. Working with one firm, just because you always have will not be good enough if that firm can’t demonstrate its access to a comprehensive selection of lenders or products (including exclusives and enhanced distribution channels), coupled with an equal commitment to the delivery of the best consumer outcomes.
Failing to do so could invoke the very real risk of causing clients foreseeable harm with serious implications for your customers and your reputation. As the duty embeds itself further into the wider consciousness of consumer culture, the FCA will be monitoring complaints upheld by FOS as an indicator of firms and providers who are potentially failing to deliver new outcomes, including the requirement for increased consumer support.
So, given the significant nature of Consumer Duty, this issue of our digital magazine is dedicated to the subject, with hints, tips, and considerations from our division heads and product experts.
We hope you find it interesting and informative and, as ever, if you do have any questions, our team at Brightstar Financial is always here to help.