The Consumer Duty – a theme running through 2024 and one to continue for 2025

The Consumer Duty has made a lot of headlines this year and as we enter 2025 its unlikely to change anytime soon. The FCA continues to publish its findings as part of its review of firms' compliance with the Consumer Duty and its most recent publication addresses the FCA's findings when reviewing firms' approaches to complaints and root cause analysis. This publication again highlights good practices for firms and areas for improvement.

The FCA has been producing summaries of its findings as it continues to review firms and their performance against the Consumer Duty.  This time it’s the turn for complaints and root cause analysis.  The insights produced by the FCA are based on a review of practices in 40 firms across a range of sectors and data provided following an information request made in January 2024 together with other data sources.  The baseline for inclusion within the sample was that a firm had had at least 90 complaints to FOS in the last three years.  The report is published so that "everyone can learn and improve".

The FCA notes that an area of good practice evidenced by firms is in relation to management information and governance structures; with firms having established clear processes for carrying out a root cause analysis and complaint trends and themes.  For smaller firms, the FCA acknowledges that they are likely to have fewer complaints and so less management information.  As a result, they should look at other opportunities to capture data such as FOS decisions.

However, the FCA also note three areas for improvement; (1) analysis of data for different customer types, (2) taking action based on insights and (3) assessing and measuring the impact of firm actions.  The FCA note that despite the fact firms are good at capturing data this was not granular enough to tell firms about the outcomes for different groups of customers, in particular characteristics of vulnerability.  Further, from data the FCA notes that it was not always clear whether there had been appropriate discussion of the data or actions leading from it, or any consideration given as to the impact of interventions where changes were made (i.e. any ongoing monitoring).  The FCA also noted in the area of governance that it was not always clear who was responsible for complaints, and that firms appeared to be sending data to committees or discussing data at board level but not using that opportunity to engage and drive change, or discussing what actions to take in light of the data.

As noted, this is the latest publication from the FCA setting out good practice and areas for improvement for firms when it comes to the Consumer Duty.  Themes emerging from these publications published throughout 2024 include – the FCA's acknowledgment that its expectations for smaller firms are different to those for larger firms, firms are producing Consumer Duty data but not doing enough to analyse and act on that data (i.e. its seen too much as a box ticking exercise and more should be done to show action, monitoring that action and monitoring the results from action taken) and a focus on vulnerable customers.  What will be interesting as we herald in 2025 is whether the FCA will use these various publications to start regulatory action against firms arguing that they have now had time to get used to the duty (its been around for ongoing services and products since July 2023 and closed services and products since July 2024) and the benefit of the FCA's publications on good practice – so broadly we can see the FCA arguing that there is no excuse for not meeting the good practice it has highlighted.  The Consumer Duty is one topic that we cannot see going away in 2025 and what happens next will be a focus for all regulated firms.

Can you link publication to - https://www.fca.org.uk/publications/good-and-poor-practice/complaints-and-root-cause-analysis-good-practice-and-areas-improvement