In case you hadn’t noticed the new Consumer Duty has gone live in the UK. I was away when this happened and since coming back I have been taking some polls around how people feel, 2 weeks in.
Before launch there certainly was plenty of fanfare (and resources to help), a pressing deadline and chorus of doom and gloom above the wrath of the FCA that would descend on August 1st…. yes I was guilty of this too!
However, with hindsight, and as ever with these things, it was just a day like any other. No great activity, no big announcement, just new regulations that simply became new rules.
So was Consumer Duty another Y2K, another GDPR? and was this, with hindsight, actually just more TCF anyway? (answer… still no)
Well, there is a lot to be said about taking a couple of weeks out to see the bigger picture.
Sometimes it is just all too easy to be so close to the detail, that we lose perspective on what is going happening at a wider scale and with longer timeframes. Looking back the reality seems to be this.
Consumer Duty is new regulation. It has been widely trailed by the FCA, so there is no excuse not to know about it.
It is a new tool in the FCA regulatory toolbox, simply giving them new powers, and measures, for enforcement.
Nothing has really physically changed at the end of July and there never was going to be a massive event… just quietly, almost silently, new regulations came into force (yes a bit like GDPR).
These new regulatory tools may not be used today, tomorrow or even sometime soon. But expectations have been set, they will ultimately have far-reaching implications, and it is now fully available if needed…
Martin Lewis, someone never short of a word around Financial Services, I thought had a very balanced comment “I’m supportive of the principle but wait to see how the reality plays out”.
The new @TheFCA Consumer Duty comes in for all financial firms (banks, insurers, card firms etc) today hopefully upgrading rights from "being treated fairly" to "customer always comes first"
— Martin Lewis (@MartinSLewis) July 31, 2023
They now must proactively look after customers. It should mean things like leaving their…
So even if you are not ready, you know there is more to do, you may still have time.
After all you may not be asked straight away. However, you will need to be ready for when that day comes.
It may seem quiet now, but once the first couple of high-profile cases are raised (after the summer holidays?) it will be back on the board agenda again.
So from my discussions last week… these are the gaps people are working on…
Evidencing good outcomes and MI
Critical going forward and something most firms, if honest, are not really well set up for. There is a lot of interesting work to understand this properly, gather good data, and go beyond the usual quality measures and KPIs being used today (which are not really good enough longer term).
Sludge practices
I always felt the cross-cutting rules were the most interesting area in consumer duty, with sludge practices falling under here. Let’s face it, what was considered, albeit sharp, standard business practice for some will now be accused of being sludge practices (if they are not explicitly already). Expect this to be a big battleground of change – it will run and run, especially with examples being highlighted in the media – good to get ahead of this one.
Fair Value Assessments
What is fair value, how do we measure this and make sure this is embedded across all products? Looking at insurance rate increases for example, recently in the news, you wonder if this will evolve into a new lever to control and review prices, at least for regulated firms… and will this will spread eventually to other sectors in light of inflation… food pricing fair value anyone?
Vulnerability management
This, as we know, has been high on the agenda for a while and much good work has been done. However, definitions are aligning, expanding and there is plenty of talk of new areas such as financial vulnerability too… it is becoming ever more greyscale than black or white. Firms are needed to adapt to this, in process and communications.
So in short… the world has not ended, but the hype is over and it is now BAU. Yes it is less sexy, but we are now in day-to-day execution mode and there are still plenty of things to do…
So, I suppose in between festivals, dodging the rain and the odd vacation it is time to put our heads down and get on with it… some of the elements will be pretty interesting and rewarding to put in (esp the data elements from my point of view), so something to look forward to when we are back.
Have a good week everyone.
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