Payments Consumer Duty multi-firm review

The FCA have published their key findings from the review of implementation of Consumer Duty in payments firms. While this review was focussed on payments firms there is clearly a high level of read across to the FCA's expectations of how the Consumer Duty should be implemented by all types of firm.

As a result of the findings being published, the FCA expect all relevant firms to consider their position against the good and poor practices identified and make changes where necessary to support provision of good customer outcomes.

Even with this additional guidance, effectively implementing Consumer Duty requirements remains a complex task with many interlinking factors. We have created a table below to help evidence your current position against the FCA’s comments and can help you cut through the noise to focus on the aspects applicable to your business and customers. Get in touch with Oliver Irons to discuss how we can support you to effectively evidence you are meeting the FCA's expectations.

Summary findings

Unsurprisingly, the FCA found significant variation in the way the Duty has been implemented and want all firms to review their approaches against the practices the FCA have highlighted. The FCA's expectation is that firms should act immediately where gaps are identified (which implies they expect firms to review implementation immediately as well).

Target market

The target market should be sufficiently detailed. Low risk products can have a relatively wide target market whereas high and medium risk products are likely to require narrower target markets. The FCA does not provide any indication of the types of payment products they consider to carry a higher level of risk.

Agent oversight

The FCA reminds firms that they are responsible for ensuring their agents and distributors are meeting the requirements of the Duty.

Fair value assessments

The FCA expect to see sufficient supporting analysis to demonstrate products / services provide fair value and that firms have made a specific judgement that their products / services provide fair value (or not). This should not be limited to benchmarking against competitors.

Firms must consider how charges affect different groups of customers based on how they use the product / service.

Consumer understanding

As part of their review, the FCA did not identify significant amounts of pre-testing of communications, or of monitoring consumer understanding once the communication had been issued. The expectation is for firms to have an effective way of testing communications including assessing whether communications support effective customer decision making.

Consumer support

The FCA found that the volume of complaints in some firms suggested shortfalls in delivery of effective support to customers. A particular focus was a lack of communication when accounts had been frozen, with some firms making changes to support and communications in relation to account freezing (where not bound by financial crime constraints).

Governance

The FCA has not seen much challenge to Duty implementation in Board and governing committee minutes and has not identified much evidence of Consumer Duty Champions bringing relevant matters to the attention of the Board.

Management information

Unsurprisingly, the FCA found that creating a robust MI suite was a challenge for many firms with some struggling to identify appropriate metrics while others considered too many metrics to be effective. In some cases relevant data was being collected but firms were unable to evidence it was being used or drawn together with other relevant metrics.

Next steps

The FCA expects firms to consider the review findings, identify any gaps or shortfalls and, if applicable, taken action to address these.

We've included a table below of the identified good and poor practice to help with this initial assessment. This includes a column to record the rationale / evidence for how your firm aligns to the good or poor practice and a section to record next steps. This will support you in demonstrating that the FCA's latest guidance has been fully considered.

Having worked with a large number of firms on Consumer Duty implementation and ongoing oversight we are well placed to provided a view of how the identified good practice is being applied practically across the industry. We can also provide an independent view of your approach to Duty implementation which will provide robust evidence of an approach to delivering good outcomes should the FCA review your activities around this in the future.