It’s Beginning To Look A Lot Like Consumer Duty

‘Twas the night before Christmas* when the FCA delivered its final gift of 2021 to advisers; “CP21/36 A new Consumer Duty: feedback to CP21/13 and further consultation.”

CP21/36 is the second Consultation Paper regarding Consumer Duty after the previous published CP21/13 back in May of this year. Below we’ve used Apricity’s initial response to CP21/13 to set the context of Consumer Duty. 

The main points covered are:

  • The consumer principle – a firm must act to deliver good outcomes for retail clients and always act in the best interests of their clients.
  • Cross-cutting rules – firms must take all reasonable steps to avoid causing foreseeable harm to customers and take all reasonable steps to enable consumers to pursue their financial goals and objectives and again, act in good faith.

Four areas of focus

  • Communications – firms should communicate in a way that is reasonably likely to be understood and facilitates decision making and take proportionate steps to review and adapt communications to adhere to the above.
  • Products and services – providers must be clear of their target market, any risks posed by their products, and also be clear on product information. Distributors must do the same, and take steps to prevent the wrong consumer types from buying/receiving those products.
  • Customers serviced – customer services must not unduly hinder consumers from acting in their own interests or lead to unreasonable additional costs for consumers including time cost.
  • Price and value – firms need to consider the impact of charges or price over the lifetime of the product or service and check that the benefits to the consumer are proportionate. This does not mean the imposition of price caps though. In essence, here we are suggesting that firms are clear about whether there is added value by the firm being involved in the distribution of this product or service.

So what about this Consultation Paper?

The second consultation paper simply enhances many of the themes that were discussed in the original paper based on the feedback from readers. The FCA is, again, emphasising that this is more than just a natural extension of TCF, and firms should go above and beyond this guidance. They highlighted that the desired impact of Consumer Duty will be based on the supervision of firms by the Regulator, and are reassuring firms that they are dedicating significant resource to it. 

The consultation period ends on 15 February 2022. The FCA has stated that once it has considered feedback to the proposals being made in CP21/36, it will make any new rules by the 31st July 2022. The FCA is also proposing an implementation period that will start after it has published the final rules and will end on 30 April 2023.

We will seek to release more guidance to our firms in due course. 

*Okay, not quite, but it feels like it!