General

Rightly or wrongly, the FCA believes there to be a general failure by authorised firms to provide retail consumers with products and services that meet their expectations. The Consumer Duty is the FCA's answer to the problem, with its stated aims of setting a higher expectation for the standard of care that firms give consumers. 

The FCA have made it very clear that they intend to actively enforce the requirements of the Consumer Duty post July 2023. This will inevitably lead to enforcement activity against the Senior Managers of any authorised firm found to be in breach of the new requirements.

The most common complaint we hear about complaints is the unpredictability of the Financial Ombudsman Service ("FOS") – and the difficulties that creates for firms handling complaints under DISP.

The FCA recently published a 'Dear CEO letter', addressed to firms offering contracts for difference (CFD) as part of its series of letters sent to different sectors on the Consumer Duty, and following on from its December 2022 letter covering its CFD Strategy.

Individuals responsible for the management of retail financial services firms are understandably concerned to know what the introduction of the Consumer Duty from 1 August 2023 will mean for them personally. As the FCA has categorically stated (in the very last para of CP21/36), ''All senior managers are responsible for ensuring that the business of the Firm complies with the requirements of the Consumer Duty on an ongoing basis." 

We discuss the newly announced duty to notify the FCA of breaches, or suspected breaches, of the Consumer Duty within its distribution chain. We explore their reminder of a firm's own PRIN 11 requirements as part of this Policy Statement and the likely practical effects.

The consumer financial services industry's current concerns about the decision making process at the FOS in its current guise are well-known. The introduction of the Duty is likely to heighten those concerns, particularly if it leads to more apparently arbitrary interpretation of vague principles and the retrospective imposition of higher standards.