The Financial Conduct Authority (FCA) has given firms a three month extension to execute its Consumer Duty for all new and existing products and services currently on sale and an additional 15 months for closed book products.
The moves have been largely welcomed by the industry but the FCA admitted “it still will be challenging for the industry”.
The deadline for implementation was originally set for April 2023 but is now July 2023 giving a full year for active products, while closed books have until July 2024.
Many within the industry raised serious concerns about the speed with which the regulator wanted to introduce its flagship policy with intermediary trade body the Personal Investment Management & Financial Advice Association (PIMFA) requesting a full two years.
Responding in May, the FCA said these concerns had been “well heard”, and it has now acted with this extension.
‘Will be challenging for the industry’
Elaborating on the extension at a press briefing yesterday, Sheldon Mills, executive director for consumers and competition at the FCA, (pictured) told journalists the regulator was faced with the challenge of balancing consumer needs with implementation and organisational effectiveness.
“Our judgement is giving an additional three months is sensible,” Mills said.
“We’ve listened to the industry. We’ve also listened to consumer groups and that’s where we’ve ended up. And for closed book products there’s more complexity there so we think 24 months is still there.
“It still will be challenging for the industry. We recognise that and that’s why we will do our best to support them in terms of this implementation and we think 12 months strikes a fair balance.”
But where the regulator finds serious misconduct, Mills added the FCA will use the powers at its disposal to punish offenders.
“Where we identify serious misconduct breaches of the duty we will use our full range of powers to tackle that including enforcement,” he continued.
“This includes fines, removing permissions and securing redress for consumers who have suffered harm where firms breach the duty and we will hold firms including senior managers and boards to account for the delivery of these outcomes to consumers.”
PIMFA applauded the FCA’s decision to agree to extend the period for firms to implement its new Consumer Duty by 15 months.
Simon Harrington, head of public affairs at trade association, said it welcomed the fact the FCA had recognised the regulation required additional time for firms to implement new systems and processes to comply with it.
“The decision to extend the implementation of the consumer duty to 12 months for new and existing policies, and then another 12 months for closed books, is broadly in keeping with our recommendations to the FCA,” Harrington said.
“We are pleased the regulator has listened to the industry and demonstrated a willingness to work with us to ensure this new regulation works well from the very beginning. Our focus now will be on supporting firms to implement the duty.”
Higher standards of consumer protection
The FCA revealed the extension as it cemented plans for the new duty which it said would set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first.
The duty is made up of an overarching principle new rules which firms will have to follow, ensuring consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and get the customer support they need when they need it.
The duty includes requirements for firms to:
- end rip-off charges and fees
- make it as easy to switch or cancel products as it was to take them out in the first place
- provide helpful and accessible customer support, not making people wait so long for an answer that they give up
- provide timely and clear information that people can understand about products and services so consumers can make good financial decisions, rather than burying key information in lengthy terms and conditions that few have the time to read
- provide products and services that are right for their customers
- focus on the real and diverse needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction