On July 31 last year, the long-awaited Consumer Duty legislation came into effect in the UK, following months of preparation and industry attention.
Consumer Duty provides a necessity for financial firms to provide support as and when needed, clear and comprehensible communications, and products and services that align with the needs of the consumer, offering fair value. Under the Consumer Duty, firms are expected to be more transparent and honest, prevent harm to consumers, and actively support their financial goals.
Following a year in existence, how has the rule impacted the industry? In the view of Stacey English, director of regulatory intelligence at Theta Lake, over the past year Consumer Duty has been a catalyst for the industry to modernise outdated practices to deliver good customer outcomes.
She added, “More work is needed to evidence the cultural shift that the FCA expects including the need for firms to proactively identify and tackle issues themselves rather than waiting for the regulator to intervene. Oversight of communications with customers is a fundamental part of the required governance.”
According to English, Theta Lake provides visibility across all channels of communications with customers, from chat, email and SMS to audio, video, whiteboards and more, proactively identifying risks within them and enabling companies to address any potential harm.
“Crucially, these communications records enable regulators to review compliance with the Consumer Duty, plus other obligations, which is more important than ever given the global regulatory scrutiny on recordkeeping, which has already led to more than $3 billion in fines from U.S. regulators for unmonitored communications,” she remarked.
A reshaping of industry
In the view of Sean Devine, business development manager at ViClarity, Consumer Duty legislation has significantly reshaped the financial services sector in the UK.
He commented, “The regulation, designed to ensure that firms prioritise customer outcomes, has led to a more customer-centric approach across the industry. Financial institutions have had to enhance their transparency, improve communication, and reassess their product offerings to ensure they meet the new standards.
“Not only has this elevated consumer protection but also increased the accountability of firms, encouraging a shift from short-term profit motives to a focus on sustainable, long-term customer relationships. The requirement for firms to demonstrate that they are acting in the best interests of their customers has led to a more rigorous internal governance structure and the adoption of more robust compliance frameworks,” he said.
Devine also explained that many challenges to the high street banks – outfits such as Starling, Revolut and Monzo – have seen a substantial rise in customers due to enhanced transparency in fees and charges, which he claims contrasts with the often complex and opaque fee structures of traditional banks.
He concluded, “In the long term, Consumer Duty is likely to drive further innovation within the sector, as firms seek to develop products and services that align with these higher standards. Overall, Consumer Duty has set a new benchmark for consumer protection in the financial services industry, and its continued impact will likely foster a more trustworthy and consumer-friendly market environment.”
Copyright © 2024 RegTech Analyst
Copyright © 2018 RegTech Analyst
