The Consumer Duty is not a ‘one and done’ project, the FCA has said, as the deadline for the next stage of implementation looms.
Speaking at PIMFA’s Consumer Duty conference, Lucy Castledine, director of Consumer investments at the FCA, said the 31 July deadline for firms to have complied with the Consumer Duty for their ‘closed book’ business was just as important as last year’s deadline for ‘open book’ business.
“It’s not a once and done exercise for firms and neither is it for us,” said Castledine. “We gave firms an extra year to get to grips with the complexity of all the systems and the increased work involved but in many ways the distinction between open and closed book will soon be irrelevant.”
Castledine said the expectations of the regulator around closed and open book business in terms of the Consumer Duty requirements would be the same, with many of the key issues around closed products and services identical to open products.
According to the FCA, firms should consider what they did in the run up to last year’s deadline and implement any lessons they had learned. Firms will still be expected to take a risk-based approach and put the greatest effort into where they identify the greatest risk of consumer harm.
Castledine said that the FCA wants to see boards working with their executives to challenge and drive them in the right direction to evidence good client outcomes and said to achieve this, ongoing outcomes monitoring would be an essential tool. Firms and their board will need to evidence the outcomes, both good and poor, alongside the actions firms intend to take to deal with any deficiencies using the right data and management information.
Reflecting on the seven months since the Consumer Duty was first implemented, Castledine said the purpose of the regulation was to bring about a sustained cultural shift in firms and their practices. She added that the FCA wants firms to take ownership of the requirements and “proactively identify the changes that are needed to improve outcomes and make those changes.”
Castledine said there have been many examples of firms taking ownership of the Consumer Duty and making improvements, but there are also instances where change has only come about because of the FCA’s early supervisory work.
“It is far better for all concerned to be in the former camp and making changes through your own initiative rather than waiting for us to ask first,” she added.
