FCA gets head start on setting Consumer Duty new year resolutions

The Financial Conduct Authority (FCA) has published their priorities under the Consumer Duty for the remainder of the 2024/2025 financial year.

So far this financial year, the Consumer Duty has celebrated its one year anniversary for its implementation in respect of open products and services, while at the same time coming into force for closed products and services. The FCA describes it as "one of the most significant changes to our regulatory approach in recent years" and, following feedback from the industry, the regulator is seeking to better keep stakeholders updated of its various plans under the Duty.   

As such, the FCA has published a webpage outlining what it is planning on focussing on in the rest of December and the first quarter of 2025. It looks like those working at the FCA still have a number of things to tick off their to do list before signing off for Christmas this year, as the various initiatives on the webpage show the timeframes the regulator is working to.

There are four areas the FCA is focussing on:

Improving standards and implementation of the Consumer Duty

The FCA wants to understand how firms are embedding the Consumer Duty and needs data in order to do so. The regulator is due to publish reports this month and in Q1 2025 outlining the findings from three related projects:

1. Analysis of the root cause of complaints and review of board reports
2. Review of vulnerable customers' treatment
3. Review of supporting consumers' informed decision making and outcomes

The FCA said the above projects will allow the regulator to share good practices and highlight areas which need improvement.

Enhancing understanding of the price and value outcome

This priority builds on work the FCA undertook in Q3 2024 regarding fair value assessments (which we discussed earlier this year), with the FCA planning to report further in the first half of 2025 on work it is doing regarding the treatment of interest on balances held in investment or SIPP platforms, pure protection insurance, unit-linked pensions or savings, and premium finance.

Sector specific priorities

The FCA has widespread plans regarding various sectors it oversees in terms of the implementation of the Consumer Duty.

• Retail banking – the first half of 2025 will see the regulator carry out work on bereavement and power of attorney in retail banking, in conjunction with work being carried out relating to vulnerable customers.
• Consumer finance – the FCA will publish findings next year on consumer understanding of credit agreements from using firms' digital tools.
• Payments and digital assets – next year the FCA will assess how well firms are able to ensure customers understand the price of foreign exchange in remittance services.
• Consumer investments – December should see consultations on draft rules for new UK retail disclosure rules (following the repeal of EU regulations), and a proposal regarding targeted support from firms to pension savers being published. The latter consultation is part of wider work being done to use the Consumer Duty to close the advice gap. The FCA also wants to improve firms' ability to identify vulnerable clients.
• General and life insurance – the FCA hopes to better understand how insurers' claims handling arrangements drive good customer outcomes, with findings to be published in the next financial year.
• Sustainable finance – also expected next financial year are the FCA's plans to extend the Sustainability Disclosure Requirements to portfolio management.

Realising the benefits of the Consumer Duty

The FCA is working through responses to its "call for input" regarding the requirements on retail firms and how the Consumer Duty can be used to simplify the same. It plans on setting out next steps in the first half of 2025.

Comment

It is clear that the Consumer Duty is a significant change, with a lot more work to be done by the regulator and firms to ensure it is fully implemented. The priorities of the FCA outlined in the webpage show it is concerned with using the Consumer Duty to protect vulnerable customers, and ensuring that firms are providing good value for money and ensuring consumers understand advice or products provided.

These priorities being published comes at a time when the FCA is under increased scrutiny following the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services' scathing report on the regulator, labelling it "opaque, unaccountable and incompetent". 

It will be interesting to see the outcome of the work the FCA is focussing on, and the impact it has on the implementation of the Consumer Duty in the industry.