The Financial Conduct Authority has said some firms’ plans to implement its incoming consumer duty have only considered requirements superficially or have been over-confident that existing policies and processes in place will be adequate.
In a multi-firm review published today (January 25), the regulator surmised that some firms still need to work on embedding the consumer duty requirements into their businesses in order to truly change standards.
It also said some firms need to prioritise their implementation plans more effectively, and that more focus needs to be given to sharing information between firms.
The regulator will soon be sending a survey to a sample of firms to further understand progress on consumer duty implementation and said it will carry out "targeted engagement with smaller firms".
The FCA will also send letters to firms, highlighting its key expectations on implementing the duty and some of the key risks it is concerned about in specific sectors.
The consumer duty, set to come into force on July 31, 2023, requires firms to match products and services to consumers more effectively, ensure the price and value of these products are fair, to actively avoid customer detriment - ie, "foreseeable harm", and to change their cultures in line with this new regulation.
"We recognise plans were likely to be high level given the early stage at which we reviewed them," the FCA said today.
"Nevertheless, we saw some plans that suggested firms may have considered the requirements superficially or are over-confident that their existing policies and processes will be adequate.
"We urge firms to carefully consider the substantive requirements of the duty, as set out in our final rules and guidance. Firms should ensure that, when they are reviewing their products and services, communications and customer journeys, they identify and make the changes needed to meet the new standards."
In one plan reviewed by the City watchdog, there was no evidence of engagement with the firm's chair or other non-executive directors, and the board had only asked one question before approving the plan.
In another example, board minutes showed that the plan was approved without discussion.
The review also highlighted the varied interpretations of a consumer duty champion.
In one plan, a champion was proposed without sufficient seniority, while other firms had decided to share the role across their boards.
While the FCA acknowledged it had not been prescriptive on the champion role, firms sharing the role was "not what we intended and our view is this will not be an effective approach given the extent it is likely to dilute the role".
In some plans, there was "limited information" about how the duty will be embedded in firms' cultures.