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Dear CEO/Director | Release Date: 3rd February 2023

To read a shorter summary of this Dear CEO/Director letter, click here.

To access the original FCA document, click here.

Long Summary

The Financial Conduct Authority (FCA) has issued a directive specifically to CEOs and directors of Retail Banks and Building Societies, emphasising the critical role of implementing the Consumer Duty. This new regulation marks a shift towards an outcomes-focused approach to consumer protection, enhancing the standard of care that firms provide to their customers.

Implementation Timeline

The FCA provided a clear timeline for the adoption of the Consumer Duty:

By the end of October 2022, firms’ boards should have approved their implementation strategies.

By the end of April 2023, all necessary reviews to align with the outcome rules should be completed.

The Duty will apply from 31 July 2023 to all new and existing products and services available for sale or renewal.

From 31 July 2024, the Duty will extend to closed products or services.

This structured timeline underscores the urgency and importance of the Duty, particularly in light of economic challenges such as the cost-of-living crisis, which amplify the need for robust consumer protections.

Scope and Application

The Consumer Duty applies across all products and services offered to retail customers and encompasses any firm that can influence customer outcomes, extending beyond those with direct customer relationships. This includes a significant focus on SMEs within the banking sector, emphasising the Duty’s broad reach and the necessity for firms to ensure compliance across all service and product lines.

Key Requirements of the Duty

The Duty mandates that firms:

Feedback from Implementation Plan Reviews

The FCA’s review of initial implementation plans from firms revealed varying degrees of preparedness. While some firms have shown a strong understanding and integration of the Duty’s requirements into their operational planning, others appear to be underestimating the scope or the depth of changes required. The FCA highlighted three critical areas needing attention:

FCA’s Supervisory Approach and Next Steps

The FCA intends to actively supervise the integration and ongoing adherence to the Consumer Duty. This includes:

Conclusion and Key Actions

Retail Banks and Building Societies must prioritise the integration of the Consumer Duty into their operational and strategic frameworks. The FCA expects firm leaders to:

This letter serves not only as a directive but also as a reminder of the heightened expectations for consumer protection within the financial services sector, stressing the importance of ethical conduct, transparency, and customer-centric operational practices.

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