FCA has published a set of Dear CEO letters it has sent to several sectors on preparation for the Consumer Duty. It has so far written to:
- asset management, custody and fund services and alternatives;
- consumer investments;
- credit reference agencies and providers of credit information services;
- general insurance and pure protection firms;
- life insurance;
- mainstream consumer credit lenders;
- mortgage lenders and administrators; and
- retail banks and building societies.
The letters set out:
- a reminder of the implementation timeline, key elements of the Duty and how it applies to firms in the relevant sector;
- FCA’s expectations for how firms should embed the duty – giving examples of good and poor practice;
- feedback from its review of firms’ implementation plans; and
- its approach to supervising compliance and planned next steps.
The letters note FCA’s expectation that implementation of the Duty should be a top priority for CEOs personally, and that boards and senior management should embed customers’ interests into their firms’ culture and purpose. They explain which customers the duty applies to – reiterating that it follows the relevant sourcebook. It notes key concerns from the review of implementation plans, and areas of concern such as the need for relevant firms to ensure they have appropriate controls in place to ensure they supervise their ARs’ compliance with the Duty.
FCA will be looking closely at specific areas of embedding the Duty, such as:
- for the GI sector, effectiveness of product governance arrangements, effectiveness of communication with customers and claims processes and outcomes;
- for retail banks and building societies and mortgage and credit lenders, the particular importance of good outcomes in the cost of living crisis – and not to underestimate the impact of the Duty on treatment of SMEs;
- for consumer investments, ensuring that consumers in the mainstream investments area are receiving services that meet their needs and are good value, ensuring that consumers are not invested in unsuitable high risk investments, taking appropriate action to stop consumers falling victim to scams and fraud and taking prompt action to pay redress where due;
- for credit reference and information firms, the risks of ineffective services, poor cyber resilience and poor complaints handling; and
- for life insurers, the risks of the significant use of outsourced services providers, the volume and complexity of closed product business, distribution and supporting retirement decision-making.
FCA will also, as time goes on, conduct a series of supervisory activities, which may involve bilateral firm engagement, “shallow” and “deep” dives into firms and multi-firm work.