Dear CEO | Release Date: 6th October 2022
To read a longer summary of this Dear CEO letter, click here.
To access the original FCA document, click here.
Short Summary
The FCA’s strategy letter to CEOs of firms providing high-cost lending products outlines concerns and expectations in light of the financial hardships faced by consumers due to the rising cost of living. The letter emphasises the importance of these firms proactively managing risks to prevent poor consumer outcomes and providing necessary assistance to those in difficulty. It highlights the upcoming Consumer Duty, effective from 31 July 2023, which will necessitate firms to demonstrate compliance with enhanced consumer protection standards.
Key risks identified include the potential for consumers to purchase unsuitable products and firms’ operational risks due to economic conditions. The FCA expects firms to support customers experiencing financial difficulties, ensuring transparency in financial promotions and maintaining robust governance to manage operational risks effectively.
The introduction of the Consumer Duty is a significant focus, setting a higher standard of care, requiring firms to ensure their products and services are fit for purpose, offer fair value, and are communicated clearly to customers. Firms are directed to prepare implementation plans and adjust their strategies to deliver outcomes that align with this duty, emphasising fair value, suitable treatment, and enhanced consumer confidence and access.
Firms are urged to review their practices and demonstrate proactive compliance with the new regulations. The FCA plans to support firms through the implementation process and will subsequently review compliance to ensure firms are meeting their obligations effectively.
The key takeaway for firms is the critical need to align operations with the Consumer Duty, focusing on consumer protection and operational integrity in anticipation of its enforcement.