It is almost a year since the Financial Conduct Authority’s new consumer duty came into force – and from where I am sitting it appears to have been an enormous success.
Most of the UK’s largest financial services firms have taken it at face value – leaning into the difficult questions that it has asked of their conduct and business models, and making changes.
Over the past two years it is no exaggeration to say that many thousands of letters, emails and terms and conditions have been rewritten. Websites have been redesigned. More firms have invested in the ability to communicate with their customers by text message.
Fees and charges have been cut – and sometimes even cancelled. In my 25 years working in this industry it has been the biggest moment of change since the Financial Services Authority was established back in 2001.
It has not, of course, eliminated all bad practice in one fell swoop.
It is fair to say that in many smaller firms consumer duty has led to no change at all. And in some larger ones it has not yet got past being a box-ticking exercise.
But day by day, more and more things continue to improve across the industry – as workstreams first catalysed by consumer duty start to come to completion.
I set up Fairer Finance 10 years ago, and a key line of work for us over the past decade has been supporting firms by rewriting technical documents such as terms and conditions and policy documents. Over the past two years we have never been so busy.
These projects often take much longer than anyone ever expects them to – as internal stakeholders struggle to find the time to keep the projects moving along.
As a result, many of the documents we have worked on over the past few years still have not made it to market. But they are on the way – and I am confident we will continue to see a steady improvement in the quality of customer literature over the next few years as more of these projects finally come to conclusion.
What has also been evident over the past year is the potential for consumer duty to be a ratchet.
In the run-up to the implementation date last July, most large firms were busy doing something in preparation. But it is fair to say some companies’ first attempts at proving they were offering fair value, or proving that their customers could understand their communications, were poor.
Over the past year the FCA has followed up with examples of good and bad practice – as well as making an example of certain companies or even whole sectors to ensure companies are taking consumer duty seriously.
This year, as that message has started to sink in, we have found ourselves supporting companies in reviewing their initial consumer duty assessments – ready to acknowledge that they probably did not go far enough first time round.
