The FCA published a third batch of portfolio letters on implementing the Consumer Duty on 3 March 2023. The letters are addressed to the CEOs/directors of firms in the following portfolios: credit brokers, credit unions, mortgage intermediaries, motor finance providers and retail finance providers.
The letters set out:
- A reminder of the implementation timeline, key elements of the Duty and how it applies to the relevant firms.
- The FCA's expectations on how the relevant firms should embed the Duty, including examples of good and poor practice.
- Feedback from the FCA’s recent review of firms’ implementation plans published on 25 January.
- The FCA’s approach to supervising the Duty in the relevant portfolios and planned next steps.
The annexes to the letters identify key issues for firms to consider in relation to the products and services, price and value, consumer understanding and consumer support outcomes, particularly in light of the cost of living crisis. Governance and oversight is a recurring theme throughout the letters, with the FCA recommending that firms take care to ensure their systems meet requirements in this area.
Particular points of interest in the various annexes include:
- The annex to the letter for credit unions points to the Financial Services and Markets Bill 2022-23 opening up the scope for credit unions to offer a wide range of products, cautioning that these should be designed to meet the needs of consumers and deliver fair outcomes.
- The annex to the letter for credit brokers identifies key regulatory issues including expectations around supervision of appointed representatives and compliance with requirements around changes of legal status.
- Mortgage intermediaries are expected to have appropriate controls in place to reduce the risk of mortgage fraud, as well as appropriate controls to oversee their appointed representatives.
- The annex to the letter for motor finance providers expressly focuses on the complexity of products in relation to the consumer understanding outcome.
- The annex to the letter for retail finance providers addresses evolving business models in the context of the Consumer Duty outcomes, emphasising that products should be designed and offered to customers considering affordability, fair value and consumer needs. Buy Now Pay Later (BNPL) products are highlighted as a particular topic of scrutiny in light of future regulatory change.
Copies of the letters can be found below:
It is for your firm to assess if it is currently providing customer outcomes which have gaps or fall short against the higher standards set by the Duty, and to identify what it needs to do to address those.