The Financial Conduct Authority (FCA) has said that many financial firms still had a long way to go on implementing its incoming Consumer Duty, as it issued its review of the implementation of the scheme.
While regulator found that many firms had “understood and embraced the shift to focus on consumer outcomes”, it noted that “some firms may be further behind in their thinking and planning for the duty.”
The FCA said some companies may not have properly finished embedding the duty throughout their business before the rules come into force on 31 July.
The consumer duty is a regulatory principle announced last July requiring financial firms to act to deliver good outcomes for their customers. It was described as one of the largest regulatory overhauls in a decade.
There are four separate outcomes with rules requiring firms to ensure consumers receive communications they can understand; products and services meet their needs; offer fair value; and they offer customers the support they need.
In the review, the FCA praised companies that had “developed robust governance frameworks… with clear executive accountability for delivery and board oversight.”
However, there were other less successful examples. In one example there was “no evidence of engagement” with the firm’s non-executive directors and the plan was passed with only one question being asked. In another example, the plan was approved “without discussion”.
One company appointed a consumer duty board champion who was not “sufficiently senior” to provide confidence they would be able to “challenge the firm’s approach”.
“The higher standards of the duty and the shift to focusing on consumer outcomes will require a significant change in many firms’ culture,” the FCA said.
Some companies’ plans, the FCA said, were “lacking in detail… with limited information about how the duty will be embedded”.
A spokesperson for UK Finance, a trade body that represents the UK’s banking and financial services firms, said they welcomed “the broadly positive findings in the FCA’s review of the extensive progress firms are making,” adding that “implementation is a significant and complex undertaking.”
The new duty, however, has faced criticism from financial institutions for being too vague and unenforceable. The July deadline has also put financial institutions under significant pressure as they seek to make sweeping changes to their operations.