Today is Consumer Duty’s birthday! It is one year since the implementation of rules for open products and services.

The Financial Conduct Authority (FCA), whose jurisdiction the legislation comes under, have taken this one year anniversary Consumer Duty as an opportunity to announce they will be attempting to relieve some of the burden financial firms are facing due to overlapping regulations.

Today also marks the deadline for closed products and services. Let’s take a look at the implementation so far and what will be next for Consumer Duty.

Consumer Duty’s effectiveness

Consumer Duty has the aim of increasing customer protection and communication across financial services. This is through things like accessible customer support, clear information, and offering products and services that are right for the consumer. You can read more about this in my long read on this topic from this time last year, or a more recent one on understanding Consumer Duty.

I haven’t been able to see any notable penalties financial services have faced for failing to meet the deadlines so far, but this may be something we will see down the line. HSBC have faced a fine of £6.2 million over customer treatment earlier this year, but this was relating to incidents between 2017 and 2018.

When it comes to how the public are feeling about Consumer Duty, research from Moneyhub shows the mixed effectiveness of Consumer Duty. They found that 41% of consumers haven’t noticed a change in their treatment by financial institutions since last year’s implementation.

Despite this, 42% of consumers said they believe there will be a positive impact from the quality and range of products and services available.

There were some smaller numbers showing areas consumers want there to be improvement:

• 13% said firms have failed to deliver good quality support and after-sales care
• 12% said firms have failed to deliver communications that help them to make effective financial decisions
• 10% felt firms failed to offer suitable products and services that meet their needs

Dan Scholey, COO of Moneyhub said: “Consumer Duty really should be a win for both businesses who want to work more efficiently and effectively as well as consumers who need more tailored solutions. The early feedback from firms that have embraced it is overwhelmingly positive.”

Overall, it looks like we aren’t seeing the full effect of the potential benefits Consumer Duty can offer.

Given these results for the current implementation, there may be some trebidation over how successful with next deadline will be for closed products and services. Yet, Helen Slater, regulatory manager at FE fundinfo, said it “should be easier for firms to work with is the introduction of closed products to the scope of Consumer Duty, as there are no communications aiming to get consumers to part with their money.  The main focus there, should be on checking whether the products deliver what they had promised and whether there are any unreasonable barriers to switching out into other products.”

Work is not over on Consumer Duty

Despite today being the deadline, the work is not yet over.

This is a sentiment shared by Andrew Stevens, principal, banking and financial services, Quadient, who said: “Banks would be severely mistaken by thinking the final Consumer Duty deadline today represents the ‘final stretch’ of adhering to the compliance rules. The FCA is only firing the starting gun.

“As the Consumer Duty rules now add closed services to the rules and ushers in a new era of banking compliance, the days of hiding behind poor customer service are over. Backed by the threat of severe penalties, the FCA seeks to end the ‘bare minimum’ approach to the communication of financial information.”

If the FCA were to take more action with the penalties at their disposal, the implementation of these policies may prove to be more effective. As Scholey commented: “We have both the stick and the carrot in place to see better outcomes delivered.”

Stevens added that “for banks to build trust with consumers, their communication should be proactive and personalised. By using tools that can leverage internal data to categorise customers into groups, banks can target their messages with more success. For example, if a change in interest rates meant overdraft fees on an account would rise, banks must ensure its message is not only read, but understood by the consumer.”

From Scholey’s perspective this issue comes down to data: “The UK has made great strides through regulation to make the data available, and with it, firms can cost-effectively understand an individual's needs and provide the right solutions at the right time. Embracing the use of third-party Open Data solutions is the best way for firms to meet Consumer Duty requirements while seeing a tangible impact on their customers’ day-to-day finances, and satisfaction levels.”

Next steps for consumer duty

This week the FCA has asked for firms to raise their concerns about rules which could be removed or simplified if they overlap with Consumer Duty. The regulator has given until 31st October for comments to be provided.

Nikhil Rathi, chief executive of the FCA said: “We are firmly committed to playing our part in supporting economic growth. The Consumer Duty marked a major shift for firms and consumers by setting higher and clearer standards of consumer protection and requiring firms to put their customers’ needs first.

“We now want to seize the opportunity of the Duty and the move to a clear outcomes-based approach to streamline our rulebook, lowering costs for businesses and supporting the competitiveness and growth of the economy.”

Responding to this call, Slater said: “Duplication makes the rules longer than necessary but shouldn’t make them harder to comply with; it will be more interesting to see if firms are able to identify any areas where adhering to the Consumer Duty may make compliance with other rules harder.  

“Additionally, it will be interesting to see what issues materialise around how consumers are treated. Let’s remember that it’s not that long ago that a lot of firms claimed not to have a single vulnerable customer on their books. While the FCA stated that at least 50% of consumers are vulnerable at some point due to their financial circumstances; life events; health issues; and understanding of financial matters. Those first Board reports will no doubt make interesting reading.”

If the FCA are able to find places to create simplifications in their rule book relating to Consumer Duty, this could make it easier them to be implemented. Yet, Stevens concluded with a point which financial services should be keeping in mind while moving on with Consumer Duty: “With the technology now available to help financial institutions rebuild trust in the age of consumer-first banking, there is simply no excuse for unclear communication and shirked responsibility.”