FCA speech: 1 year on from the Consumer Duty

Sheldon Mills, Executive Director of Consumers & Competition at the FCA, has delivered a speech reflecting on the Consumer Duty a year on from its implementation.

The speech welcomed the improvements demonstrated by firms in delivering more effective consumer outcomes in the first 12 months of the Duty. Key highlights of the speech included:

• the Duty is already making a significant impact on consumer outcomes, and the FCA has noted improvements in firm culture, conduct and governance:
  • many firms have brought in new data and metrics in order to more effectively understand their customer base;
  • the FCA has seen strong evidence of firms better collecting information around customer vulnerabilities, and using this to improve their ability to meet customer needs;
• the Consumer Duty is designed to be flexible and to adapt to innovations in ways firms produce good outcomes for their customers:
  • it is also important that firms continue to evolve their approaches to measuring consumer outcomes and change approach if it is not working;
  • AI presents an opportunity for firms to think more creatively about how they measure and produce good customer outcomes;
  • harms are often exacerbated by poor understanding of customer support requirements, like using complex product terms and conditions or difficult to understand fee arrangements;
• the FCA is seeking to better understand how firms are embedding the Duty and any potential issues which are emerging:
  • it believes showing good practice will benefit the industry and help provide better outcomes;
  • the FCA sees its role as not to set prices but to encourage firms to consider if they are offering fair value to their customers. Service and understanding, alongside price, are also key components to value. It is important profits are not at the expense of customers receiving fair value;
  • the Duty aims to provide smaller firms with the ability to take a proportionate approach in line with their size, market, and the needs and circumstances of their customers;
• the Duty is not designed to get rid of all risks to customers, but aims to empower customers to make the right decisions for their own risk appetites:
  • consumer protection and economic growth should be mutually reinforcing.