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100 Days from the next Consumer Duty Milestone

We are 100 days from the next milestone on 31 July 31, 2024. By then, firms should have assessed their closed product ranges.

The FCA defines closed products as products which are no longer marketed or distributed to retail customers nor open to renewal.

It is up to firms to consider each product and decide whether it is closed, and if it falls within the scope of Consumer Duty.

Firms must then supply evidence of regulatory integration, initiated regular reporting on positive customer outcomes, and critically, firms must have eased their Board in formally evaluating the embedding of Consumer Duty within their organisation. Firms must supply compelling evidence of wholeheartedly adopting the new principle, ensuring their culture prioritises customer-centric strategies.

The FCA are trying to ensure that forms bring closed products up to the same standards as products currently available.

There is no one-size-fits-all approach to implementation and integration; each firm has interpreted the Duty's implications for its organisation and culture uniquely. There is no quick fix to address every aspect of the rules, as the regulation is intentionally challenging, compelling every firm to meticulously assess its operations and their alignment with the Duty's essence.

Here’s some information to help you.

What is The Consumer Duty?

The Consumer Duty is a package of measures comprised of: A new Consumer Principle (Principle 12) that provides a high-level expectation of conduct and associated outcomes. A set of overarching cross-cutting rules which develop and amplify the standards of conduct that the FCA expects under the Consumer Principle.

The four Consumer Duty outcomes are:

· Products and Services.

· Price and Value.

· Consumer Understanding.

· Consumer Support.

When do the Consumer Duty rules come into effect?

For new and existing products or services that are open to sale or renewal, the Duty will come into force on 31 July 2023. For closed products or services, the Duty will apply from 31 July 2024.

Who does the Consumer Duty rules apply to?

The Duty applies to all firms with a key role in delivering retail customer outcomes, including those with no direct customer relationship. For example, it applies to firms that can determine or influence: the design or operation of retail products or services, including their price and value.

Is Consumer Duty mandatory?

Yes, all firms are required to implement the rules for open products and services by the end of July 2023, and for closed books of business by the end of July 2024.

What is a closed product under The Consumer Duty?

Closed products are those no longer marketed or distributed to retail customers nor open to renewal on or after the 31 July 2023. The Consumer Duty has been described as applying to these products “in full” but not “in the same way”.

If existing customers can continue to make payments under the existing product terms, this would still be considered ‘closed’ if the product or service is not open to new customers. For example, a pension product that is no longer sold to new customers, but where existing policyholders can continue to pay in contributions, would be considered closed.

What do firms need to do about closed products?

For firms who have already been through the process with open products, there is much to be learned but firms pay find it a challenge where they have to gather historical information accurately.

We would always recommend that firms build a robust implementation plan that broadly covers the following areas.

1. Identify products that meet the criteria.

2. Review closed products to ensure they offer fair value.

3. Assess the complexity of each product and any known issues or complaints.

4. Record any measures taken to mitigate or manage the risk to consumers.

If you need any help with the process or navigating the regulation, please get in touch with us today.

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