The FCA has written to firms in the following sectors on implementing the Consumer Duty for closed products and services by 31 July 2024:
- Asset management;
- Consumer finance;
- Consumer investments;
- Life insurance;
- Retail banking; and
- All other firms.
The Dear CEO letters set out a definition and examples of what closed products and services might include (Annex 1) and also remind firms that the rules apply slightly differently than for open products and services. For example, there are no requirements for firms to have a target market or distribution strategy, as there would be no further sales for a closed product or service.
Firms must review closed products and services against the Duty requirements before the end of July and then on an ongoing basis. Areas of focus for firms to consider are:
- gaps in customer data;
- fair value;
- treatment of vulnerable customers – the FCA has highlighted this as a particular focus area for banks, having seen weaknesses in some banks’ approach to vulnerable customers in respect of their open books;
- gone-away or disengaged customers – gone-away customers are expected to be a particular issue for life insurance and so the FCA expects firms to challenge themselves to undertake appropriate tracing to find customers; and
- vested contractual rights.
The FCA expects life insurers to be particularly affected due to their large books of closed products and the associated volume of product reviews, fair value assessments and communications testing needed prior to the deadline.
The FCA expects firms’ senior management to carefully consider the contents of the letters and take steps to ensure their firm is compliant with the Duty by 31 July 2024.