The FCA has provided further information on various aspects of the forthcoming Consumer Duty by way of a December update to its Consumer Duty webpage.

Key updates include:

  • From February 2023, firms applying for authorisation will have to evidence they can comply with the Consumer Duty. The FCA will expect to see an applicant firm’s framework for assessing fair value, its plans to monitor outcomes for retail customers and the arrangements it will have with other firms in the distribution chain. Existing firms applying to vary their permissions will be asked to provide a copy of their implementation plan and any supporting evidence.
  • The FCA confirms that the Consumer Duty will not apply retrospectively. Both the FCA and the Financial Ombudsman Service work on the basis that conduct should be judged on the rules and standards in place at the relevant time.
  • While only firms conducting regulated activities in the UK are subject to the Consumer Duty, distributors of non-UK products and services must take all reasonable steps to understand the product or service, its target market and the value it provides so that it will be distributed appropriately. Firms should also consider whether including a firm that is not subject to the Consumer Duty in the distribution chain may lead to a risk of poor customer outcomes. For firms dealing with non-UK customers, the Consumer Duty will apply in line with the existing regulatory perimeter, so that where current rules apply to a firm dealing with non-UK customers the Consumer Duty will also apply.
  • The FCA recommends that firms start their Consumer Duty outcomes monitoring ahead of the implementation date to ensure readiness even though monitoring is only strictly required after the deadline. Firms will need to use their judgement to identify data sources as evidence against the outcomes, with the type of information depending on facts such as size, client base and types of products and services.
  • Manufacturers and distributors will need to work together and share information in order to perform their own roles effectively and deliver good outcomes. Distributors should obtain the information they need from manufacturers but will not usually be expected to share information themselves unless requested. Firms are generally only responsible for their own activities but a firm should raise concerns with other relevant parties, including potentially the FCA, where it identifies consumer harm elsewhere in the chain.

The FCA also refers to Chapter 8 of its December Quarterly Consultation Paper aimed at clarifying certain issues relating to the scope of the Consumer Duty (CP22/26). Looking ahead, the FCA reminds firms of the package of portfolio and sector-specific letters scheduled for early 2023. These letters are intended to set out the FCA’s expectations for implementation alongside findings from the FCA’s review of firms’ implementation plans.