The FCA has issued an update for firms on three aspects of the new Consumer Duty where it feels further clarification is needed:

• October implementation plans

• Consumer Duty board champions

• Definition of closed products

This is to help firms focus their efforts on the right areas, and clear up any potential misconceptions about what is expected.

October implementation plans

As you will already be aware, the FCA expects all firms to have put together a Consumer Duty implementation plan by the end of October. However, it goes on to clarify that it does not expect firms to have scoped out every aspect of the work required by this initial deadline.

The plan only needs do enough to reassure governing bodies (or senior management/Directors in smaller firms) and the FCA that firms have carefully thought through their obligations under Consumer Duty, and that these can be delivered in time for the 2023 and 2024 deadlines.

The update reaffirms that:

• Firms are also expected to show their plan has been scrutinised at senior levels, including at board level (or senior management/Director level where a board structure does not exist).

• The plan must factor in any co-operation with third parties that will be required, particularly in relation to the data gathering exercise needed to complete fair value assessments.

Board champions

In response to questions and feedback around the purpose and expectations of a board champion, the update gives the following explanations:

• The board champion’s main function is to support the CEO and Chair in ensuring Consumer Duty is raised in board discussions, and that the board is in turn challenging governing bodies and senior management on how they’re fulfilling the expectations of Consumer Duty.

• The nature and specific responsibilities of the role are up to individual firms to decide, and the board champion is not a prescribed responsibility under the Senior Managers & Certification Regime (SM&CR).

• In general, the board champion should be an independent Non-Executive Director (NED), however firms may use their own judgement as to the most appropriate person for the role, for example in some firms this could be the Chair.

• The board champion is not responsible for delivering Consumer Duty – only ensuring that it is discussed and scrutinised.

• In FG22/5 there are several examples of questions a board champion could ask to prompt discussion and ensure the board is holding its governing bodies to account. These are the same types of questions the FCA is likely to ask of firms.

Smaller firms may wish to appoint a Consumer Duty champion, however the FCA would not necessarily expect the same level of formality as found in larger firms with a board structure/governing body.

Definition of closed products

As the Duty comes into effect a year later (31^st July 2024) for closed products than it does for current ones, this update reaffirms the definition of a ‘closed product’: Closed products are those that are no longer open to new customers, even if a customer is still paying into the product.

All other products and services – including ones that are already in force but continue to be available to new customers – must be Consumer Duty compliant by the July 2023 deadline.

It is up to firms to make the distinction between what is and what is not a closed product.

The original update from the FCA can be found here.

If there are any queries, please contact [email protected].