UK FCA on consumer duty progress and what comes next

The UK Financial Conduct Authority (FCA) has published a blog post discussing the findings from firms' year 2 consumer duty board reports and what firms can do now to help them prepare for the next round of reporting in Q3. Under the consumer duty, firms must report annually on what their monitoring found about customer outcomes, and what actions they will take as a result. The FCA notes that while firms have improved, further progress is needed ahead of the third reporting cycle.

The FCA observed stronger governance and board oversight, including more formal board review and approval of reports, better action plans and ownership, and wider use of quantitative and qualitative data to demonstrate customer outcomes. There is also more evidence of firms improving how they identify and monitor outcomes for vulnerable customers. However, the FCA notes that the quality and depth of analysis was variable.

Firms are advised to focus on the following areas in the year ahead:

• Clearly link data to customer outcomes, where boards should push for analysis that goes beyond management information (MI) dashboards and provides insights. Firms should also identify emerging risks and challenge their own practices where data suggests that customers may not be getting good outcomes.
• Monitor outcomes delivered by third parties, by taking responsibility of the outcomes their products deliver, regardless of who interacts with the customer. This must be reflected in firms' MI, oversight arrangements and board scrutiny.
• Evidence meaningful board challenge, ensuring their minutes and papers clearly set out the discussions which have been had, the questions that were asked and any follow up actions that were requested.
• Deepen assessment of consumer understanding and support, by being able to evidence how: communications are tested; consumer comprehension is assessed; and how they respond to consumer behaviours which indicate misunderstanding or friction.

Looking ahead, the FCA expects firms to continue improving their outcome monitoring, governance and distribution oversight. It will also consult on changes to rules and guidance on distribution chains, as well as sharing examples of good and poor practice to support firms' future consumer duty compliance.

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