Businesses regulated by the Financial Conduct Authority (FCA) have until July 2023 to adhere to the first set of rules under the Consumer Duty regulations.
But research by Moneyhub has revealed that 10% of decision makers within advice firms – which include chief executives, chairs and board directors – do not believe their companies have a good understating of the legislation.
Of the 150 senior members polled, 61% claimed they knew a lot about the impending rules, 31% knew a little and 7% knew nothing at all.
Moneyhub shared concerns that this “knowledge gap” has contributed to inaction across the sector, since a third of decision makers believed their firm was not be able to comply by the original deadline of April 2023, 19% said it was challenging for their business, while 14% said that compliance was not possible at all for them.
The FCA has since moved the deadline to July 2023, but there is still worry that many companies will struggle to be ready in time.
According to the research, over half (56%) of decision makers said their firm was still not compliant and had no projects in place to become so, despite the FCA expecting company boards to have plans ready by October 2022.
Samantha Seaton, chief executive of Moneyhub, said: “There is a clear knowledge gap within firms around the incoming Consumer Duty rules, but ignorance isn’t an excuse for non-compliance. It’s vital that there is more awareness not only around what the new regulations will mean for businesses, but also how to become compliant in a way that benefits the business.
“Too often we can see regulation as a box-ticking exercise, but that means we could be missing out on significant commercial opportunities. Data, and in particular, the contextual insights available from open banking and open finance transaction data, can provide firms with the tools to design more targeted products, services and customer journeys which lead to stickier, more profitable relationships with customers, on top of being Consumer Duty compliant.”
Considering Moneyhub’s research findings, what does the FCA actually expect from firms when it comes to complying with the Consumer Duty?
Sheldon Mills, executive director of consumer and competition at the regulator, spelled out what the upcoming set of rules mean for businesses.
In his speech given at the Consumer Protection in Financial Services Summit, he said: “To remind you of what we expect the industry’s efforts will deliver:
- Consumer understanding – “We would expect products to come with timely and clear information that customers can understand so they can make informed financial decisions. Customers are making complex choices about debt, mortgages, pensions, investments, and other products, often on a smartphone. It’s more important than ever to ensure they have the key product information, such as its features and charges, easily accessible and understandable. This is about the consumer journey, the digital user experience as well as the disclosure of contract terms.
- Products and services – “Firms should be offering customers products that meet their needs, rather than pushing products that aren’t suitable or needed. We all think about payment protection insurance as a historic example of this. But this isn’t a historic issue. We see consumers being pushed into high-risk investments, unaffordable high-cost credit and unsuitable debt products that do not meet their needs.
- Consumer support – “When it comes to customer services many of us have experienced long call-waiting times and reduced access to in-person services such as bank branches. I’ve certainly raged at a chatbot before but I’ve also had experiences where it was really helpful in solving problems quickly. Ultimately, your customers want their problems solved quickly and effectively. They want to receive support that meet their diverse needs. We expect firms to ensure customers are supported throughout their relationship with them and consider the best ways to engage including digital or non-digital. We appreciate that firms don’t like losing customers. But we want to see competitive markets, where it is as easy to switch, cancel or complain about a product as it is to buy it in the first place. This is especially important now, when every penny counts for many people. As a result, we expect firms to ensure any exit fees are reasonable.
- Price and value – “We expect consumers to receive fair value. Our intention is not to set prices and our rules don’t have this effect. But we expect firms to satisfy themselves that the prices they charge are reasonable for the benefits. For example, a firm lending to customers with high credit risks would need to satisfy themselves that any high charges have a reasonable relationship with the benefits for the customer.”