Three Months on From Consumer Duty; Where Are We With the Initiative to Protect Vulnerable Customers

Three months on from Consumer Duty; where are we with the initiative to protect vulnerable customers

By Jonathan Barrett, CEO of Comentis

Consumer Duty, the Financial Conduct Authority’s (FCA) initiative to protect customers including those who are vulnerable, has been in place for a little over three months now. Jonathan Barrett, Co-Founder and Managing Director of Comentis evaluates how firms are coping so far with their vulnerability assessments and what the regulator might do next.

The FCA recently gave an update on how firms have been faring with the Duty. It stated that many firms have made a real shift in their practices and culture, which is positive. However, it also gave a stark warning that the Consumer Duty is not a “once and done” exercise – firms need to make sure they are learning and improving continuously and will need to evidence this in their annual board report.

In general, we’re seeing a mixed bag. Some firms are doing brilliantly in their vulnerability identification and assessments under Consumer Duty, whilst others seem to be struggling somewhat. Worryingly, a few haven’t even started yet.

For the most part though, firms seem to be aware of the regulations and want to get the implementation right. But to ensure they are getting it right and continually improving, data is, and always will be, key. The regulator is expecting firms to build their banks of vulnerability data and learn and adapt based on this. And this is where we’re starting to see a growing gap between those that are doing well and those that are falling behind.

Prior to the arrival of Consumer Duty, it’s fair to say that very few firms conducted regular analysis of hard data on vulnerability. The reason for this was simple – very few actually had any hard data. Those that are now doing well, therefore, have started to build up some of this valuable data. Three months in, we believe that there’s an opportunity for these firms to assess what they’ve gathered so far, take stock, and see if their target market assumptions are playing out as expected. They could also look – if vulnerability has been identified – at how well that individual customer has actually been supported. With this knowledge, they can then determine whether their preparations were fit for purpose or if there are changes required and then develop from there.

Getting a head start on this process is exactly how the firms that are already ahead will stay that way. The FCA is mandating an annual report on Consumer Duty, but has advised not to wait until 31st July 2024 for firms to publish that outlook. The reason for this being that if any adjustments are required, a whole year won’t already have passed before those changes are implemented. With that in mind, if a firm already has a mandatory internal reporting date – perhaps at the end or the beginning of the year – it may be good practice to consider tying their Consumer Duty reporting into that. It’s not mandatory of course, but it would be good practice.

There are still a small number of firms who may feel that they don’t need to change their ways of working in line with their Consumer Duty obligations. Some, for instance, might think that being smaller means they’re safe from the Duty. And while it may be true that the FCA will focus most of its attention on the largest players, the regulator has been very clear that there will be no exceptions made.

We’ve spoken before at Comentis about how the FCA never meant for the 31st July to be treated as a finish line. And the regulator has confirmed this – it’s not a “once and done” exercise. Rather the regulation is intended to be the firing of a starting pistol; marking just the start of a broader conversation on vulnerability. There really is no time left to fall behind.