The Consumer Duty Act: What UK companies need to do now

Kaelyn Barron

Across industries, the bar has been raised for consumer care.

Amid a recent surge of misleading information, poor customer support, and products that exploit vulnerabilities and biases, regulators have become far less tolerant of offerings that don’t represent fair value.

How well is your organization doing in this area? Just as importantly, is your board up to speed on these efforts?

Being able to answer these questions is critical, particularly if you do business in the UK.

On July 31 — just days away — the Financial Conduct Authority’s Consumer Duty Act will come into force "for new and existing products and services that are open for sale or renewal.”

And the FCA itself declares:

“It’s crucial that firms are asking themselves the right questions, to make sure they are on track and making the most of the remaining time.”

What this means for you:

“We expect boards, or equivalent management bodies, to have clear oversight of Consumer Duty implementation plans.”

Regulations with great expectations

There are many drivers behind the Consumer Duty Act — from customer support policies that have been lagging behind digital business models, to products that let customers down (such as business interruption insurance that didn’t cover specific aspects of the COVID-19 pandemic).

But how does the Act translate into tangible oversight and action? And what questions do you need to ask management in order to report to regulators and other stakeholders?

Fortunately, the FCA offers guidance on its website, paraphrased here into a quick Duty of Care checklist.

Is your organization:

  • Testing your products and services to make sure they’re designed to meet customer needs, then making changes to improve outcomes and reduce the risk of harm?
  • Using data and market intelligence to monitor the fair value of your offerings, and taking action as needed?
  • Testing the effectiveness of your communications, particularly with vulnerable groups, then adapting as necessary?
  • Conducting similar assessments for your customer support using data, market intelligence and customer feedback, with equal responsiveness before and after the sale?

Avoiding foreseeable harm is just the beginning. Under the Act, firms are expected to take proactive action to ensure positive outcomes for customers by empowering consumers to make decisions that best align with their needs and goals. For example, in the case of a wealth management advisor, fair fees and swift remediation would be only the start of their customer obligation, should something go wrong. They'd also need to show that they are helping customers pursue their financial objectives, like planning for retirement or providing for a dependent.

Here are some key questions that can help you prepare at your own firm:

  • Do you have the necessary capabilities in terms of data collection, customer service and post-sale support?
  • Do your communications help customers make timely, effective, informed decisions?
  • At a higher level, do you have the right people in the right roles, properly resourced, for every stage of the product lifecycle?
  • What risks or obstacles stand in the way of success — and what are you doing to address them?

Keeping compliance on track

The Act has a phased two-year timeline that began in July 2022.

We’re at the midpoint now, and here’s what the FCA expects in terms of progress: “By this stage [companies like yours] should have identified any potential gaps or weaknesses in the firm’s compliance and developed a plan to remedy this.”

By this time next year, you’ll need to be able to do the same — and show your work — for products and services that are no longer on the market.

“In reality, this means firms only have nine months of the twelve-month period to fully complete the work,” writes KPMG. “It only gives distributors three months to respond, make decision about its distribution strategy and implement any changes to be compliant.”

Reporting dashboards can help

All of this is a tall order for already-busy finance and audit leaders, and the boards they advise.

To demonstrate good outcomes as outlined by the FCA, organizations need to make sure they're collecting all of the right data, from market intelligence to customer feedback. They need to continuously monitor progress and red flags. And they need to keep the lines of communication open, with customers and within the organization — from the top down and bottom up — to enable informed, compliant decisions.

Since we’re a year in to Duty of Care Act compliance, your organization is probably immersed in all of these tasks and more, and may be struggling to keep up.

A reporting dashboard for customer feedback, audit and board oversight can make your job a lot easier. You’ll be able to monitor the full product lifecycle for updates, changes in risk and controls, and progress on actions. You’ll be able to swiftly surface the information you need, through convenient cross-links rather than multiple spreadsheets, databases and emails. And you’ll be able to make the highlights pop with tables, graphs, diagrams and more.

Learn more about reporting dashboards and how to use them for Consumer Duty of Care compliance.

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Kaelyn Barron
Kaelyn Barron, Senior Specialist at Diligent, has expertise in ESG, environmental law and the intersection of governance with these issues. Her background in international relations allows her to provide unique insights into emerging ESG frameworks and regulations that impact multiple regions.