Consumer Duty

Raising the bar for consumer protection.

The FCA’s expectations for the Consumer Duty are clear and the implementation deadlines have been set.

The Consumer Duty will increase the current level of consumer protection in the retail financial services market. The FCA has signalled a "paradigm shift in its expectations" and therefore the impact of the Consumer Duty should not be under-estimated in terms of its regulatory intentions. The FCA is not just repositioning and articulating existing requirements — the initiative represents a “raising of the bar” and a “mind-set shift” with far-reaching implications for the retail sector. The FCA acknowledges that, although some firms may already be meeting some of these expectations, other firms will need to develop significantly to meet them.

The Consumer Duty’s wide application reduces any ‘first mover disadvantage’ that could be a barrier to firms making the appropriate enhancements. It is intended to be deeper than just a firm’s policies and procedures — to go right to the heart of its culture, strategy and business.

The FCA is seeking to drive culture and conduct changes in firms by placing an expectation that a firm’s approach is embedded across the entire customer journey, and within each of its relevant departments. This initiative signals an intended destination of the FCA’s journey to outcomes-based regulation.

The Consumer Duty will be implemented in two phases:

Phase 1

A 12-month implementation period for open products and services giving firms until 31 July 2023 to make the required changes.

Phase 2

A further 12-months for firms to implement and comply with the Duty for closed products or services (i.e. those are no longer being sold or marketed). The Consumer Duty will be fully in force by 31 July 2024.

Key milestones

The implementation period includes milestones for when the FCA expect firms to have finished planning their implementation work, reviewing their existing open products and services, and remedying issues identified to ensure they are fully compliant:

31 October 2022

Consumer Duty implementation plans agreed by the Board
Firms are expected to be able to evidence appropriate scrutiny and challenge by its Board to ensure their plans are deliverable and robust. Firms should expect to be asked to share implementation plans, Board papers and minutes with supervisors and to be challenged on their contents.

Where appropriate assurance of plans cannot be provided by that date, firms will be expected to inform the FCA.

30 April 2023

Completed open product and service review
Firms need to have fully reviewed all existing products and have shared the outcomes with distributors by the end of April 2022.

In reality, this means firms only have nine months of the twelve-month period to fully complete the work. Assuming firms need all this, it only gives distributors three months to respond, make decision about its distribution strategy and implement any changes to be compliant.

Read more about the Consumer Duty, practical insights on the implication for firms, how the FCA will supervise differently as it transitions to outcomes-based supervision and ways in which KPMG professionals can support firms in our other articles: