Dear CEO/Director | Release Date: 3rd March 2023
To read a longer summary of this Dear CEO/Director letter, click here.
To access the original FCA document, click here.
Short Summary
The Financial Conduct Authority (FCA) has issued a detailed directive to firms in the credit brokers sector regarding the implementation of the Consumer Duty, a regulation designed to enhance consumer protection by enforcing a more outcomes-focused approach. This letter outlines the timeline for implementation, expected standards, feedback from reviews, and the key risks associated with credit broking that need addressing.
Key Points from the Letter:
Implementation Timeline:
By the end of October 2022, firms should have finalised their implementation plans.
By the end of April 2023, necessary reviews to comply with outcome rules should be completed.
The Consumer Duty becomes enforceable from 31 July 2023 for all new and existing products and services.
Expectations for Credit Brokers:
Credit brokers are considered both ‘manufacturers’ and ‘distributors’ under the Duty, responsible for both the design of their services and the distribution of financial products. This dual role subjects them to comprehensive responsibilities to ensure their services meet customer needs without causing foreseeable harm.
Requirements Under the Consumer Duty:
Products and services must align with the needs and objectives of their target market.
Pricing should reflect fair value, ensuring a reasonable balance between cost and the benefit to the consumer.
Communications with consumers must be clear and supportive, aiding them in making informed decisions.
Support throughout the lifecycle of the product or service must be adequate and responsive to consumer needs.
Monitoring and Action:
Firms are required to continually monitor customer outcomes to identify and rectify any instances of poor service or detrimental impacts on consumers.
Feedback on Implementation Plans:
Some firms are well-engaged with the requirements and have robust plans, while others are lagging, potentially risking non-compliance by the deadline.
The FCA emphasises that the Consumer Duty is integral to its broader strategy of setting and testing higher industry standards up to 2025. The letter underscores the need for firms to integrate the Duty into their operational and strategic frameworks to enhance consumer protection actively. Firms must prioritise aligning their services with the Duty’s requirements, ensuring that consumer interests are deeply embedded within their corporate culture and operational practices. This directive highlights the FCA’s commitment to enforce these standards rigorously, with a focus on improving industry practices and consumer outcomes in the credit broking sector.