While firms’ Consumer Duty processes do not have to be “perfect” from day one, the Financial Conduct Authority (FCA) does expect them to have the capability to monitor outcomes from the day the rules come into force next month.
This is according to FCA head of competition policy Ed Smith who was speaking on the regulator’s latest podcast about outcomes monitoring in the Consumer Duty. The rules come into force on 31 July.
When asked whether the regulator expects firms to have the capability in place to monitor outcomes from the outset, Smith said from day one firms will need to demonstrate they are acting to deliver good outcomes and protecting consumers from harm.
“They need to show they’re equipping customers with the communications that they can understand, they’re providing products and services that meet their needs and offer fair value. That’s all of the outcomes under the Duty,” Smith continued.
Tackling breaches at an early stage
Smith explained that as outcomes form a key part of the duty, firms need to understand and evidence these outcomes.
“That will enable them to monitor the compliance on an ongoing basis and to tackle any breaches at an early stage,” he added.
“We want firms to use their data, use their technology to improve those services. So, we do expect firms to have the capabilities to monitor outcomes when the Duty comes into force.”
Open to supporting firms
But Smith pointed out that the regulator also recognised that firms will have longer-term ambitions to improve things like data capture, systems functionality and to ensure the speed of technological change is “very fast” in some of these areas – particularly in the areas of data, data capture and data analysis.
“Firms will also have a strategy going forward to be able to improve their data and monitoring capabilities and use better types of data over time,” he added. “And we’re very open to supporting firms to develop that data, to develop monitoring capability over time.
“And we’re very open to the discussions. We should really have discussions as part of that exercise about how firms intend to make data capture more sophisticated, more granular to understand those outcomes better.”
Smith conceded, however, that the regulator was not expecting “brilliance” from day one.
“You don’t expect anything perfect. But firms, from day one, should be able to use some types of data to monitor and assure themselves that customers are getting good outcomes, or identify where they’re not getting those good outcomes. And then, on top of that, have a strategy for developing their data, their systems over the long term to be able to monitor those.”
Almost two thirds expect to be fully compliant
The podcast coincided with release of the FCA’s latest anonymous survey of 1,230 firms assessing their preparedness for Consumer Duty implementation.
The survey found most firms believed they were on course to implement the Duty by the 31 July deadline.
Almost two thirds (64%) of firms surveyed said they would be fully compliant by the deadline and a further 23% said they would comply with most requirements by the deadline but would still have some work to do. Just 7% of firms surveyed said they would still have significant work to do after the deadline or had not started work on the Duty.