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Consumer Duty: where you should be with implementation and the challenges ahead


The FCA published PS22/9 the ‘New Consumer Duty’ (the Duty) in July 2022.

This new regulatory obligation creates an enhanced set of conduct standards and practices, requiring firms to put the best interests of customers at the forefront of their business. These rules are a step above and beyond the existing Treating Customers Fairly (TCF) requirements, renewing the FCA’s focus on customer experience and support, as well as increasing the overall product governance that firms must have in place.

Previous work in this space focussed on TCF (FCA Principle 6),  Vulnerable Customers, Covid-19, Cost of Living Crisis, and a variety of Dear CEO letters. This has been combined in the Duty to create an end-to-end process, establishing financial services wide minimum standards that prioritise good customer outcomes for all applicable products.

The Duty’s requirements differ from firm to firm, depending on whether they manufacture or distribute products, and what these are.

Implementation milestones

Various implementation milestones were set out at publication, as highlighted in the diagram below. The first milestone, October 2022, has now passed.

Firms must have conducted all the preliminary work needed to create a Consumer Duty Implementation Plan, had their board challenge and approve this, and have appointed a Consumer Duty Champion.

They should now be well underway embedding the Duty’s requirements in accordance with this, as the April 2023 milestone is rapidly approaching. By July 31st 2023, the Duty will apply to all of a firm’s open products, which make up the bulk of their customer offering.

Key risks and challenges ahead of the next milestones

Short Timeframes 

The milestones set by the FCA are tight for rules and regulation of this magnitude. As highlighted above, firms must have completed all the preparatory work in order to understand what their gaps are, in turn informing their actions to remediate these gaps. Leaving remediation to the third milestone (April-July 2023) may not allow sufficient time for completion given the scale of the changes required. If a firm is falling behind in implementing broader product governance measures during the second milestone, they may not have time to implement product specific ones in the third.

Insufficient Resource

Consumer Duty places a significant weight on the shoulders of in-house Compliance Teams due to the scale and complexity of its requirements. The volume of work required to accurately implement the Duty within the short timeframes stipulated is large, and compliance teams may not have the capacity, resource, or specialist knowledge to navigate the obligations.

Lack of Knowledge

The rules and guidance documents span nearly 300 pages of in depth and detailed text. A number of webinars and industry events have been held by the FCA to both support firms’, and clarify common misconceptions and misunderstandings that are prevalent in the market; all in response to the complexity of these rules and the phase shift that these represent. Inaccurate or incomplete understanding of these will result in an implementation that fails to address all the elements of consumer duty, resulting in non-compliant systems and controls. As the Duty is an ongoing requirement, any failures at this stage will need to be remedied in the future, requiring further resources and time to be invested.

Inadequate Pre-existing Frameworks

Firms will face difficulty implementing these new requirements if existing consumer protection requirements have not been embedded correctly, such as (I)COBS, TCF, and DISP. Inadequate frameworks will create larger workloads for firms, as they must redesign and add additional steps into these to comply with all aspects of the Duty.

Consequences of getting it wrong

The FCA has a zero-tolerance policy for non-compliance with consumer-oriented regulations.

Consumer Duty is a flagship policy, setting the tone and measure of market conduct for the foreseeable future. As such, the FCA is reviewing firms’ actions with a close eye, already requesting and challenging a number of Implementation Plans, and assessing subsequent work to see that this conforms to the plan. Consequences for non-compliance are wide ranging and can include:

Regulatory fines

In 2020 a major bank was fined £26,000,000 by the FCA for the unfair treatment of customers facing financial difficulty. The FCA determined that the bank failed to treat customers fairly or to act with due skill, case and diligence.

Enforcement actions 

The FCA has a wide range of enforcement powers including fines, withdrawal and refusal of authorisations, and making public announcements regarding disciplinary action.

Additional scrutiny

Regulatory scrutiny and supervision will increase from the FCA once they become aware of a firm’s failure to embed requirements and deliver good customer outcomes.

How we can help

We are experts in implementing regulatory change, combining industry know-how, compliance knowledge, and start-to-finish project management to achieve the best outcomes for our clients. Our experience spans the financial services sector, with our senior team having experience across the asset and wealth management, insurance, and banking spaces.

We are supporting a wide range of clients with their implementation of Consumer Duty. We have a strong understanding of the common pitfalls and difficulties of incorporating the Duty’s requirements into your current compliance framework, obtaining senior stakeholder buy in, and in getting the project over the line. Given the tight timelines for implementing all of the Duty’s rules, this is experience that can prove the difference in the project being a success and receiving FCA sign-off.

We are able to quickly understand your business model, identify key areas of concern, and create a tailored solution that satisfies the regulatory requirements whilst being business-friendly. We can also validate your implementation and pick up on common flaws quickly and efficiently.

If you would like to find out more, or have any questions, please contact Matthew Ranson.