Although the final Consumer Duty deadline is July, there has been some key milestones, including an interim deadline of 30th April 2023 when firms need to have completed their initial reviews.
The reviews are a critical aspect of the new Consumer Duty requirements. They provide evidence that you have reviewed your business operations in order to meet the regulatory obligations under the new duty, by being proactive in your approach.
The Financial Conduct Authority (FCA) has warned of its concerns that many firms are being complacent about the new duty – assuming that they have most of the requirements covered already. But many firms are missing this more proactive requirement within the FCA’s approach. Firms need to have greater monitoring arrangements, ability to identify risks, weaknesses and appropriate adaptations before they impact consumer experience. Firms also need to evidence that they are being appropriately proactive in considering all significant changes under the new requirements, particularly within e-money and payments.
Focus areas to meet the Consumer Duty review deadline
If your firm is one that has yet to properly get to grips with Consumer Duty, it is now the time to allocate appropriate resources to conduct the review of the business ahead of April’s deadline. By undertaking a detailed gap analysis, testing, monitoring and review of the current activities against the new requirements of the duty, you can focus efforts on the most critical areas where weaknesses or gaps have been identified, to avoid any penalties for breaches of compliance.
You should look at each of the outcomes and decide what they mean in the context of their business model, culture and attitude to risk. From this, you should define the metrics and measures for each outcome – basically your Consumer Duty KPI’s.
- What will you monitor?
- What is acceptable for each metric and what would require remedial action?
- What would that action be – further investigation / more regular monitoring etc. ?
- How will you grade these in terms of priorities?
- What data and feedback do you already have and how does it fit into your requirements?
- What gaps are there – how can you fill these gaps?
Keeping it structured and concise is generally the best approach, allowing your firm to build up additional monitoring as required and as appears necessary from future reviews. You should create an effective framework to manage the activities that fall under the duty, keep track of remediation actions, apply any monitoring requirements as a result of the current and future reviews and oversee compliance with the rules, in accordance with the predefined KPIs.
As part of this process – you also need to define the subjective terms used in the guidance in a way that fits your business, for example terms like ‘fair value’.
You also need to include measurements for culture / employee engagement / training as applicable. Remember, these need to be done in a way that can be evidenced to the FCA.
The new guidance also includes the requirement for a Consumer Duty champion. This can be more than one individual – although the FCA have concerns about the role being watered down if spread. The FCA expects to see the Consumer Duty embedded with clear accountability and Governance.
- How will you achieve this?
- Who in your organisation is best equipped to track, interpret, and report on the different aspects of the new requirements?
Assign responsibility and make sure that expectations are clear, and individuals have the resources to accurately and consistently implement, manage and monitor as required, as well as a way to communicate them to leadership, other staff members, or other stakeholders as necessary.
The FCA have sent letters to all firms to remind them of the new requirements and the importance of compliance. They have undertaken a review of progress within some firms and we can expect greater scrutiny of wider firms over the next few months. It is important to understand the FCA’s position and stance on how firms have implemented the Duty so far, as well as recognise where the FCA’s focus is to help firms target their implementation efforts on the most important elements.
How we can help
If you need help defining your reviews, or any other part of your Consumer Duty implementation, Neopay can help. We run facilitated workshops to help firms identify what their reviews should look like, reviews of implementations to highlight gaps, as well as other services to provide support and advice about Consumer Duty. To find out more, contact our specialist team here.
For everything you need to know about the Duty and the requirements for your business, check out our dedicated FCA Consumer Duty section for the latest updates.