FCA Propose New Consumer Duty Rules to Go-live in April 2023
10 December 2021
The FCA has issued a second consultation paper (“CP21/36”) this week in relation to its proposals for a new Consumer Duty seeking to achieve a higher level of protection for consumers in retail financial markets. CP21/36 also includes an indicative implementation deadline for new rules and guidance of 30 April 2023.
The first consultation paper (“CP21/13”), issued in May this year, set out the FCA’s high-level proposals in three elements:
- A new Consumer Principle providing an over-arching expectation of the standard of conduct by firms;
- A set of ‘cross-cutting rules’ related to common themes that apply across all areas of firm conduct and which expand upon the FCA’s expectations relating to the Consumer Principle; and
- A suite of rules centred around four specific outcomes related to key components of firm-consumer relationships, those outcomes being: communications (renamed under CP21/36 as “consumer understanding”); products and services; customer service; and price and value.
As per CP21/13, it was always the FCA’s intention to publish a second consultation by the end of this year.
CP21/36 summarises the 235 responses received by the FCA to its initial consultation and explains how they have considered the feedback related to the proposed framework and incorporated it into the draft rules and guidance set out in this second consultation paper.
This second consultation sets out that the cross-cutting rules and four outcomes remain, with further detail provided on the FCA’s expectations and notably a removal of the “all reasonable steps standard” within the cross-cutting rules. It also confirms that the Consumer Duty Principle will be “A firm must act to deliver good outcomes for retail clients” and this will become Principle 12 (PRIN), with Principles 6 and 7 disapplied where the Consumer Duty applies. Another point of note is that the paper confirms that a Private Right of Action will not be introduced at this time, as part of the set of measures.
The FCA are now consulting on these rules and guidance and the deadline for responses to these is 15 February 2022.
The FCA expects to publish finalised rules and guidance via a policy statement by 31 July 2022, per the timeline proposed in its initial consultation paper, with rules coming into effect in April 2023.
What should firms be doing?
Now that the FCA has issued a first draft of rules and guidance relating to the new Consumer Duty, as well as proposing an ambitious 9 month implementation period, firms should begin to mobilise implementation projects in respect of the new requirements covering, but not limited to:
- Impact analysis dependent on size and nature of business activities;
- Gap analysis between current process and the new rules;
- Governance and MI requirements;
- Consider any changes required to customer journeys; and
- Product governance arrangements.