Consumer Duty Implementation

FCA Consumer Duty

The Consumer Duty came into force in July 2023, setting higher standards of consumer protection in UK retail financial services.

The Consumer Principle

Principle 12: "A firm must act to deliver good outcomes for retail customers."

This is the overarching requirement that applies to all aspects of firm activities.

Cross-Cutting Rules

Three Fundamental Expectations

1. Act in good faith

   • Honesty and fair dealing
   • Not exploiting customer vulnerabilities
   • Meeting reasonable customer expectations

2. Avoid causing foreseeable harm

   • Proactive harm prevention
   • Product and service design
   • Customer communications

3. Enable and support good outcomes

   • Active customer enablement
   • Barrier removal
   • Appropriate support provision

Four Outcomes

1. Products and Services

• Products designed to meet needs of target market
• Distribution aligned with target market
• Regular product reviews
• Manufacturer/distributor responsibilities

2. Price and Value

• Fair value assessment
• Benefits justify price
• Consider all costs
• Vulnerable customer impact

3. Consumer Understanding

• Communications customers can understand
• Appropriate information timing
• Effective disclosure
• Support for customer decision-making

4. Consumer Support

• Support meets customer needs
• Easy to access
• Timely and effective
• Switching and cancellation enabled

Target Market

Manufacturer Responsibilities

• Identify target market with sufficient granularity
• Design products to meet needs
• Distribution strategy
• Fair value assessment
• Information to distributors

Distributor Responsibilities

• Understand manufacturer's target market
• Identify own target market (if different)
• Ensure distribution in target market
• Review distribution arrangements

Vulnerable Customers

FCA Definition

Customers who, due to personal circumstances, are especially susceptible to harm.

Key Drivers

• Health (physical/mental)
• Life events (bereavement, job loss)
• Resilience (low financial, emotional)
• Capability (low literacy, digital skills)

Firm Obligations

• Understand customer base vulnerability
• Design products and services appropriately
• Train staff to recognise and respond
• Monitor outcomes

Board and Governance

Board Responsibilities

• Champion Consumer Duty
• Approve implementation plans
• Challenge management
• Annual Board report

Annual Assessment

• Evidence of customer outcomes
• Identification of poor outcomes
• Root cause analysis
• Remedial actions

Monitoring and Evidence

Data and MI

• Customer outcome metrics
• Complaints analysis
• Customer feedback
• Third-party reviews

Continuous Improvement

• Regular reviews
• Action on findings
• Culture of improvement