Consumer Duty:
Countdown to Compliance

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Posted on: 19/04/2023

As the Financial Conduct Authority (FCA) issues further clarification(1) on how to meet Consumer Duty requirements, firms are reminded that this "significant regulatory initiative" is to be taken seriously ahead of the impending July deadline. What does this mean and where should firms be now?

Firms are now racing to prepare for the FCA’s upcoming Consumer Duty – the new regulation poised as a catalyst for organisations to think beyond simple rule book compliance and take a holistic and technological approach to ensuring that their customers receive good outcomes.


No room for misconduct

This increased pressure follows the announcement that fines issued by the FCA for misconduct almost doubled in 2022(2), sending a clear message that it is “back in business” post-pandemic, whereby some regulatory initiatives were offered leniency. It also follows a year where mistreatment of retail customers across financial services was vast, ranging from the poor treatment of customers in guarantor loans, to poor advice regarding pension transfers and self-invested personal pensions.

This news has further heightened the urgency of the Consumer Duty, and the FCA has said that it is determined to protect consumers whose financial stress during the today’s cost of living crisis might lead them to making unwise decisions in terms of investment or borrowing.


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How should firms be preparing?

This customer-centric approach marks the FCA’s new data-driven and analytical outlook to regulatory compliance, but the amount of data needed on the customer to comply with Consumer Duty requires a new level of operation for most businesses. Putting customers at the heart of Consumer Duty means firms are expected to truly understand a consumer’s end-to-end journey – from product design to post-sale support - with a granular analysis of enterprise-wide interactions.

But there is a clear opportunity here. With its comprehensive monitoring and analytics capabilities, AI-driven conversational intelligence has already been propelling itself into the spotlight as an essential tool for maintaining compliance and uncovering rich insights to understand and augment the customer journey.

In fact, many organisations are already making way for these technologies, with Microsoft stating that AI will monitor approximately 95%(3) of all consumer interactions by 2025 – powering the future of customer experience to uncover behavioural insights, complaints root cause analysis, consumer outcomes, and customer and agent feedback – some of the many requirements outlined in the new Consumer Duty.

But firms shouldn’t delay. Starting this process now will increase the opportunity to refine methodologies and help to improve the understanding of the customer’s journey.


From what, to how? The key deadlines you need to know.

The FCA expects Consumer Duty compliance to be an iterative process due to its wide-ranging scope. Whilst there is not a one size fits all approach, firms are expected to have “substantive” compliance from day one of the July 31st implementation deadline. In what is considered as a complete change in mindset and not just rule-book compliance, the FCA also warns firms need a longer-term view and should challenge themselves to continuously review their processes to improve and deliver better outcomes for customers.

With as many as two thirds(4) of lenders not yet compliant just before the festive break, there is still work to be done ahead of the deadline. By now, firms should have looked to onboard a Consumer Duty Champion to ensure that the Duty is being discussed regularly and raised frequently in relevant discussions within the organisation. Stakeholders should also have been consulted, ensuring each part of the business understands its obligations and timelines and is ready and able to support research and implementation plans. If not already done, firms should also look to conduct a gap analysis by mapping each product and service journey to customer interactions to highlight any areas where processes do not meet Consumer Duty requirements. The final deadlines are as follows:

30 April 2023: Manufacturers should have completed all the reviews necessary to meet the outcome rules for their existing open products and services so they can share with distributors to meet their obligations under the Duty and identify where changes need to be made.

31 July 2023: Implementation deadline for new and existing products or services that are open to sale or renewal.

31 July 2024: Implementation deadline for closed products or services.


Worried about complying with the new regulations?

Though the deadline is looming, it’s not too late to get compliant. Check out our Consumer Duty resources or get in touch to explore our solutions.


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1/ https://www.fca.org.uk/firms/consumer-duty-information-firms

2/ https://www.ftadviser.com/regulation/2023/01/05/fines-issued-by-the-fca-more-than-doubled-in-2022/

3/ https://news.microsoft.com/europe/features/ai-powering-customer-experience/

4/ https://www.financialreporter.co.uk/two-thirds-of-banks-and-building-societies-not-yet-consumer-duty-compliant.html

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