Consumer Duty update: key deadlines and actions

With just 2 months to go until the first anniversary of Consumer Duty, firms now face two key tasks.

Firstly, they need to prepare the initial Board report. For many firms, this might be an iteration of last year’s submission. However, confusion over an FCA attestation left many firms waiting for a form that never came. This year, the requirements are clear: there is a board report requirement and an outcomes monitoring requirement, as set out in PRIN2A.8 and PRIN2A.9.

Over the past twelve months, some NEDs and Board members may have lost focus. Last year, there was widespread discussion on LinkedIn and podcasts about the importance of ‘being close to the business’ to ensure Consumer Duty compliance. However, that chatter has diminished, possibly replaced with questions like, ‘Anyone got a template report?’

So, what next for firms? They have until the end of June to ‘soft-educate’ their board members and NEDs. This means informing them about what is coming, preparing them for what they will see, and highlighting any major successes, risks, and action plans. One resounding similarity of all Boards is the phrase ‘We don’t like surprises’.

Whilst firms technically have two full months to complete their board report approvals, in reality, they have only about a month to get their boards up to speed to meet the deadline. This will only be possible if they have a board template ready and the correct inputs programmed to provide the outcomes.

Secondly, the closed book deadline for product reviews is approaching. This presents different challenges compared to assessments for open book products, particularly impacting life insurance products. Closed books may require more complex fair value assessments.

The FCA expects life insurance products to be significantly impacted by the closed book assessments and has targeted communications and updates to providers accordingly. On 16 May, the FCA sent a ‘Dear CEO’ letter reminding firms, especially those dealing with life insurance, of the approaching deadline and outlining additional considerations, such as:

• Gaps in firms’ customer data
• Fair value
• Treatment of consumers with characteristics of vulnerability
• Addressing gone-away or disengaged customers
• Managing vested contractual rights

The FCA also remind firms that product and fair value assessments are due by 31 July, and remedial requirements must be in place by that date. The Duty applies in full to closed products and services from the deadline. It does not apply to the past actions of firms. Instead, it applies to the ongoing actions of firms from 31 July 2024. For example, communications issued by the firm from this date for a closed product or service will need to comply with the Duty’s higher standards.