May 3, 2024

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by: kiran

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Tags: "Consumer Duty", "Regulation"

Get Ahead of the Consumer Duty Deadlines

Key Messages:

31 July 2024 sees the deadline for the Consumer Duty coming into effect for closed products. While much of the focus last year will have been on implementing and embedding the Duty requirements for open products and ensuring that they are designed and sold to appropriate target markets, it is important that firms have not let slip their work on applying the Duty to the ongoing servicing of existing customers where their products are ‘closed’ (as we know by now, Closed Products are those which are no longer marketed or distributed to retail customers nor open to renewal).

Any firms that have closed products should be well on their way in applying the Duty to these and should already have processes in place that have identified all closed products, evaluated the impact of the rules on these, put in motion actions to meet the requirements, and ensured that appropriate governance is in place for such.

For closed products, firms should be considering the consumer journey and the full product lifecycle, which will be different to those products that are not closed. For example, there is no need to consider sales practices with regards to closed products, including the identification of target market as these products are not being targeted towards anyone anymore. However, evaluating whether these products still provide value and meet customer outcomes is important, as is ensuring that customer communication and customer support is in line with Duty requirements. It is also important to recognise that vulnerable customers may still exist within your closed product population, and therefore that you have put controls and mechanisms in place to be able to identify these, and it is clear on how vulnerable customers in relation to closed products will be supported.

Such work should be aligned with the cross-cutting rules and outcomes-focused approach of the Consumer Duty. Firms should have asked themselves whether they “are applying the same standards and capabilities to delivering good customer outcomes as they are to generating sales and revenue” and as ever, the all-important requirement of being able to evidence this! This includes being able to show that the quality of customer support post-sale is as good as the support and engagement provided pre-sale – what evidence would you be able to provide to support your answer to this question?

What Firms need to consider:

The Consumer Duty Champion has a vital role to play in ensuring that momentum does not slip in terms of embedding the Duty requirements for existing products, as well as implementing the requirements in relation to closed products. It is important therefore that you have identified what specifically is required for your closed products and actions are well under way to address these. This should include:

  • Ensuring that all closed products have been identified;
  • That such products have been put through an appropriate product governance and product review process;
  • That any gaps or areas of potential harm in closed products have been identified;
  • That appropriate strategies have been developed to address these gaps, which could include modification to the products, or additional customer support;
  • Ongoing monitoring mechanisms using data and feedback is in place to continually assess the performance of closed products;
  • Appropriate Management Information (MI) can be obtained and is used to support decision-making and to identify areas for improvement in relation to closed products;
  • Ensuring that the upcoming Consumer Duty Annual Board Report includes detailed information on how closed products are managed, monitored, and improved in line with the Consumer Duty.

The Consumer Duty Champion should be ensuring that the Board and appropriate Governance Committees are regularly updated and engaged in relation to the status of closed products and that there is clear and transparent communication with customers about closed products.

Working back from the 31 July 2024 deadline – you should have a clear picture of how you will meet this deadline. Considering the now short window, if you feel that you are not going to meet this timescale, then you should consider whether you require further support or whether regulatory engagement is required.

As ever, should you require support in any of these areas or any other regulatory matters, please do not hesitate to contact Padda Consulting.

Better compliance starts here.