July 2024 marked the first full year of the FCA’s Consumer Duty being in place. The Duty is fundamentally impacting how many BVRLA members operate and has required not just the introduction of new processes, but a step change in how organisations think and operate. The BVRLA’s Director of Legal and Membership, Shashi Maharaj recently attended the FCA’s “Consumer Duty: One Year On” event. Here, he shares some of the key themes and observations that BVRLA members need to be aware of.
After a lengthy period of consultation and review, the Financial Conduct Authority (FCA) introduced the Consumer Duty on 31st July 2023. I recently attended the FCA’s ‘Consumer Duty: One Year On’ event at their offices in London on behalf of the BVRLA. The event was streamed online to those who had registered, and, if you missed it, I would recommend taking the time to catch up on demand. FCA representatives were joined by the FCA’s Executive Director, Consumers and Competition, Sheldon Mills, and Chief Ombudsman of the Financial Ombudsman Service (FOS), Abby Thomas. Together, they provided examples of good practice and areas for improvement, along with a forward look at their priorities for the year ahead.
It’s clear through our own work on the Consumer Duty (Duty) at the BVRLA, including the inclusion of the Duty into our Leasing Broker Inspection Programme, that our members have been keen to take on the challenge of delivering better customer outcomes. This is echoed in the speech delivered by Sheldon Mills “Back to the Lily pond”, who recognised that many solo-regulated firms have ‘embraced the Duty’ and ‘used it as a driver to shift [their] culture’.
The Duty was always designed to be so much more than a simple tick-box exercise. It is encouraging to see so many taking the Duty in the right spirit by making positive changes.
Sheldon Mills recognised that one year on from the implementation of the Duty to Open Products and Services, the application now to Closed Products and Services sees not the ‘beginning of the end’ of implementation efforts. It is instead the ‘end of the beginning’.
The Consumer Duty implementation was never intended to be a ‘once and done’ act. This was a topic we explored in our BVRLA Compliance Forum in July. During those conversations we saw many references to the ongoing journey which is the Duty, a theme echoed by Sheldon Mills. The FCA also highlighted that the next step of the Duty implementation is more ‘taking [a] leap’, with ‘many smaller hops to come’.
The question that “springs” to mind: Do BVRLA members need more landing lights to ensure that they land on the right Lilly pads? In reality, the regulator has done well to provide information and guidance so far but more certainty and clarity will definitely be welcomed particularly given topics like the Skilled Persons work currently underway and future applications of the Duty.
We’re always keen to hear from our members on how you’ve found your Consumer Duty implementation journey, and whether there remains any area that you would benefit from further support on.
The FCA confirmed at the ‘One year on’ event that a forward-looking Consumer Duty work plan will be published. It should give firms a good indication of focus areas. The FCA team indicated they will prioritise areas where:
-
They feel ‘there is a need to act to address harm, or potential harm, to retail customers’,
-
They want ‘greater understanding of how [firms are] embedding the Duty, the outcomes [their] customers are getting, and where potential issues are emerging’
-
They feel ‘sharing more information on good practice and their expectations will benefit industry and help drive better outcomes’.
This could include requests for additional data, although Sheldon Mills committed to the FCA only asking for what it ‘really needs’.
As an industry, it’s worth us considering the value in this proactive approach from the FCA and whether there is anything else we need from the regulator to be successful. With the Duty in place, the FCA recognises its role to not be setting prices, but rather ensuring from the that firms are offering fair value from the outset. Sheldon confirmed the FCA will ‘not stand in the way of a well-run business making profit … where there is effective competition in the interests of customers’.
An alignment that I see as vital is found within the relationship between the FCA and the FOS. This was recognised at the event, with Abby Thomas sharing their views on the importance of understanding customer needs and not operating to a one-size fits all model. It was noted that firms should focus on understanding the issue and the required resolution, not just on closing the complaint. Abby referenced the value of firms being ‘clearer upfront’ and considering the end-to-end journey to establish at which points customers could benefit from ‘contact, reassurance or a simple reminder’. This is particularly important in the cases of customers with a vulnerability, an area recognised by the FCA as one of focus too.
Beyond that, a key takeaway for members is to think about their business's contractual terms. It is likely that the implementation of the Duty will make it even harder for firms to justify the use of often lengthy, small print documents which require intensive analyses to discern important information.
The importance of embedding the Duty at every level of an organisation was also recognised by Abby. A real shift in firm culture to embrace the Duty will be impossible without this approach. One way of ensuring this will be to offer proportionate training on Consumer Duty throughout your firm, something the BVRLA's Learning & Development Team can support with if you’re unsure where to start!
Overall, it was clear from the FCA team’s messaging that they recognise the effort made by regulated firms so far, but expect there to be ‘much more to come’ throughout their implementation and embedding journey.
We hope that BVRLA members have used the requirement to produce their board report one year on from the implementation date as an opportunity to pause and take stock. It is important too to recognise and celebrate where you have already seen good customer outcomes, but also to be clear and directed on what your next steps need to be to further embed the Duty.
For any further support or questions, please contact the BVRLA team on [email protected]
