The Consumer Duty deadline is fast approaching. And according to the FCA, not every business is on target to be fully compliant by the 31 July deadline.
Research undertaken for the FCA found that most firms believed they were on course to implement the Duty on time. Specifically, 64% of firms surveyed said they would be fully compliant by the deadline. A further 23% said they would comply with most requirements by the deadline but would still have some work to do. 7% of firms surveyed said they would still have significant work to do after the deadline or had not started work on the Duty.
So, all firms need to make the most of the time before the 31 July implementation deadline.
The new rules mandate that FS firms set higher standards of consumer protection. This is particularly important so far is it relates to vulnerable customers. In summary, the new Duty requires banks to put their customers’ needs first.
It is a far-reaching Duty. Among the most important challenges is the need to collect and manage data and to demonstrate effective strategies to avoid behavioural bias.
Firms need to demonstrate to the FCA that they have incorporated the principles of the Duty within their culture.
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And within their products and their policies. The FCA has made clear that firms need to show evidence that they are embracing the spirit of the Duty.
There remains key aspects of the rules that affected firms continue to question. For example, can banks actually separate out and prioritise their most vulnerable customers? Do consumers actually understand what banks are saying?
FCA Consumer Duty deadline: industry comments
Steve Round, Ex-Chair of The Big Issue Foundation, Co-Founder at SaaScada & chair of the governing board forum of the Global Alliance for Banking on Values
“Banks will be non-compliant because the left hand doesn’t know what the right is doing. People and processes in banks are currently so fragmented that trying to gain a complete view of customers and identify the most vulnerable people is a pipedream.
To comply with Consumer Duty, banks must drastically improve visibility to help customers make good financial decisions – e.g. adding spending alerts to accounts which flag if someone is spending outside their means.”
Dean Standing, Chief Customer Officer at Sagacity, an independent consultancy
“The New definition of vulnerability is causing havoc. “Vulnerability” is now defined based on four factors (health, life events, resilience, capability) – meaning anyone can become classified as vulnerable at any time, especially as the cost-of-living crises develops.
Sagacity has witnessed firsthand large organisations’ failure to implement processes which continuously assess customers’ financial and personal situations, including information on benefits, pensions and household composition.
This will lead to non-compliance and hefty fines when Consumer Duty comes in – as well as leaving customers will end up sliding deeper and deeper into debt, not getting the support they desperately need.”
Andrew Stevens, former Global Business Architect at HSBC, and Principal, Banking and Financial Services at Quadient
“Research shows magnitude of education challenge facing banks. Research from Quadient emphasises that banks are still failing to effectively communicate with customers. For instance, only 8% of consumers could fully understand updated overdraft charges. Banks that don’t dramatically change the channels and language they use to communicate with and educate customers risk falling foul of Consumer Duty.”