Consumer Duty

The Consumer Duty is a very significant piece of regulation that sets higher expectations for the standard of care firms across the financial services industry give to consumers.

It has been described by the FCA as a “paradigm shift” in its expectations of firms in retail markets. Its purpose is to drive cultural change and in still consumer trust and confidence. It introduces a new Principle that “A firm must act to deliver good outcomes for retail customers”.

The products and services outcome rules are central to firms acting to deliver good outcomes. They set out a range of requirements, including the need for relevant firms to:

• ensure that the design of the product or service meets the needs, characteristics, and objectives of customers in the identified target market
• ensure that the intended distribution strategy for the product or service is appropriate for the target market
• carry out regular reviews to ensure that the product or service continues to meet the needs, characteristics, and objectives of the target market

The price and value outcome

The specific focus of the price and value outcome rules is on ensuring the price the customer pays for a product or service is reasonable compared to the overall benefits (the nature, quality, and benefits the customer will experience considering all these factors). Value needs to be considered in the round and low prices do not always mean fair value. The FCA expects firms to think about price when assessing fair value but not at the expense of other factors.

The consumer understanding outcome

The consumer understanding outcome rules retain the obligation under Principle 7 for firms to communicate information in a way that is clear, fair, and not misleading. But they also build on, and go further than, Principle 7 by requiring firms to:

• support their customers’ understanding by ensuring that their communications meet the information needs of customers, are likely to be understood by customers intended to receive the communication, and equip them to make decisions that are effective, timely, and properly informed
• tailor communications considering the characteristics of the customers intended to receive the communication – including any characteristics of vulnerability, the complexity of products, the communication channel used, and the role of the firm
• when interacting directly with a customer on a one-to-one basis, where appropriate, tailor communications to meet the information needs of the customer, and ask them if they understand the information and have any further questions
• test, monitor, and adapt communications to support understanding and good outcomes for the customer

The consumer support outcome

The consumer support outcome rules set overarching requirements in relation to the support firms provide their customers. They should be read in conjunction with other rules that cover specific elements of the servicing of customers, such as our Dispute Resolution: Complaints (DISP) rules. They require firms to:

• design and deliver support that meets the needs of customers, including those with characteristics of vulnerability
• ensure that customers can use their products as reasonably anticipated
• ensure they include appropriate friction in customer journeys to mitigate the risk of harm and give customers sufficient opportunity to understand and assess their options, including any risks
• ensure that customers do not face unreasonable barriers (including unreasonable additional costs) during the lifecycle of a product or service
• monitor the quality of the support they are offering, looking for evidence that may indicate areas where they fall short of the outcome, and act promptly to address these, and
• ensure they do not disadvantage groups of customers, including those with characteristics of vulnerability

The breadth and scope of the new requirements mean that we’ll need to:

• work closely with our distributors and suppliers to collectively deliver good customer outcomes
• carefully consider the data and management information we receive and share across our customer journeys, ensuring greater transparency and the right levels of oversight across all parts of the distribution chain
• continue to engage with the regulator and other stakeholders during the iterative implementation period, supporting industry-wide best practice.

We have a good understanding of the vulnerabilities present within our customer base through extensive research and analysis and have worked with specialist charities to ensure we have the right solutions available to support our customer’s needs.

All frontline staff are trained on how to identify a vulnerability and how to support vulnerable customers. We have oversight models in place to provide assurance that we're effective at ensuring good outcomes for our vulnerable customers.

We have a range of treatment solutions for customers including adapted communications (braille, large print, audio, coloured paper etc), payment holidays, signposting to charities like MacMillan or Samaritans and we have processes in place to actively signpost customers to benefits in their policy, e.g. Wellbeing support when appropriate.

We have forums in place that regularly reviews the feedback from customers in order to identify and deliver improvements.