[INSIGHTS]: FG22 5 Non Handbook Guidance on Consumer Duty

External Links:

https://www.fca.org.uk/publication/finalised-guidance/fg22-5.pdf

Summary

The Financial Conduct Authority (FCA) has released non-Handbook Guidance for firms on the Consumer Duty, outlining expectations and principles for delivering good outcomes to customers in the financial services industry. The guidance emphasizes the importance of customer-centric culture, governance, and accountability within firms. Firms are required to monitor and regularly review customer outcomes, identify areas of poor outcomes, and take appropriate actions to rectify issues. The guidance also highlights the need to monitor outcomes for customers with characteristics of vulnerability and protected characteristics, ensuring they receive equitable treatment.

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Key Points

  • The Consumer Duty guidance from the FCA sets higher standards for firms to prioritize good outcomes for customers.
  • Firms are expected to embed customer interests throughout their culture, governance, and leadership.
  • The FCA rules require firms to monitor and review customer outcomes regularly and adapt their products, services, and policies accordingly.
  • Boards or equivalent governing bodies should review and approve assessments of whether firms are delivering good outcomes, aligning with the Duty, at least annually.
  • The four drivers of culture—purpose, leadership, people, and governance—must all prioritize delivering good outcomes for customers.
  • The Senior Managers & Certification Regime (SM&CR) holds senior managers accountable for ensuring compliance with the Duty.
  • Individual conduct rule 6 under the SM&CR requires all staff to “act to deliver good outcomes for retail customers” where the Duty applies.
  • Firms should monitor outcomes throughout the customer lifecycle, including design, distribution, and delivery of products and services.
  • Monitoring should identify risks, areas of poor outcomes, and discrepancies between customer groups.
  • Firms must gather relevant data and maintain records to demonstrate compliance with the Duty.
  • The guidance highlights the importance of considering customer outcomes in remuneration and incentive structures.
  • Monitoring should go beyond complaints data and include feedback, reviews, and data analysis.
See also  [INSIGHTS]: CP23 13 Strengthening Protections for Borrowers in Financial Difficulty: Consumer Credit and Mortgages

Key Take Aways

  • Firms must prioritize delivering good outcomes for customers at all stages of their interactions.
  • Effective monitoring of customer outcomes is essential to assess compliance with the Duty.
  • The SM&CR plays a crucial role in holding senior managers accountable for delivering good outcomes.
  • Culture, governance, and leadership should align with customer-centricity.
  • Firms should consider the impact of their policies on delivering good outcomes and avoid discrimination.
  • Monitoring outcomes for vulnerable customers and those with protected characteristics is critical.
  • Proactive action is required to address evidence of harm or vulnerability among such customer groups.
  • The Duty aims to improve outcomes for all customers, ensuring fairness and transparency in financial services.
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