UK FCA good practice and areas for improvement on fair value under the consumer duty

The UK Financial Conduct Authority (FCA) has published findings from its supervisory work on how consumer finance firms assess, evidence and monitor fair value under the consumer duty’s price and value outcome. The publication is accompanied by a blogpost. The FCA found positive examples of firms taking structured and proportionate approaches to assessing fair value but also identified recurring areas for improvement where some firms:

• did not fully account for fees and charges when assessing the expected total price customers might pay
• did not clearly explain how their fair value conclusions were supported by the evidence available or how the price paid by customers compared with the benefits they could reasonably expect to receive
• relied heavily on assumptions, narrative statements or management information that lacked sufficient detail or supporting evidence
• gave limited consideration to non-financial costs (such as consumers’ time and effort), how value might change over time or outcomes for different customer groups, including customers with characteristics of vulnerability
• did not communicate fees and charges clearly, prominently or at the right time to support informed customer decision-making
• did not adequately monitor repeat or cumulative charges or assess their impact on customer outcomes
• could not demonstrate that their controls were appropriately designed, operating effectively or reducing the risk of causing foreseeable harm, particularly for customers experiencing financial difficulty.

Firms are advised to consider the FCA's findings and assess how they may inform their approach to meeting their consumer duty obligations. The FCA will continue to monitor this area and where it identifies significant risks of consumer harm, it will take appropriate action.

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