Consumer Duty

Is Consumer Duty just another TCF thing?

4 min read

As the industry and analysts continue to pick apart the FCA’s final guidance on Consumer Duty, there are some skeptics wondering whether the new rules genuinely mark a shift in the regulator’s approach to customer outcomes or whether it’s just their Treating Customers Fairly (TCF) mandate in disguise. 

Weighing in on the debate is Joseph Twigg, our CEO, who argued in a recent webinar that Consumer Duty was in fact TCF ‘with teeth’.  He outlined 4 key areas where TCF and Consumer Duty fundamentally differed, which we’ll cover in this post. 

It’s worth mentioning that the fair treatment of customers has always been at the top of the FCA’s agenda. In fact, their whole raison d’être is, “Financial markets must be honest, fair and effective so consumers get a fair deal. We work to ensure that these markets work well for individuals, for businesses and for the economy as a whole.” But despite their purpose, in reality, there are still firms out there that are simply not putting consumer outcomes over and above that of their profitability. Which is why the FCA is upping the ante when it comes to unscrupulous sales and marketing practices and making it more difficult for firms to turn a blind eye to poor customer treatment lest they incur some serious fines and accompanying reputational damage. 

So here are the 4 ways we believe Consumer Duty is not just another TCF thing: 

  1. Purpose

The purpose of TCF was to ensure firms had the right infrastructure, culture and framework in place to enable the fair treatment of customers. The FCA wanted all firms to consistently show “that fair treatment of customers is at the heart of their business model”.


Consumer Duty differs in that it’s not about showing the FCA you have the processes and frameworks in place but whether or not they’re actually effective in delivering good outcomes for customers.  The emphasis here is on outcomes.  Not just fair outcomes, but good outcomes and the proactive nature of firms to deliver them versus a fair outcome being a happy accident.    


2. Responsibility

It comes as no surprise that there are still companies out there engaging in shady practices.  In fact, it’s no secret firms build in budget for fines that they might be landed with should they be unlucky enough to get caught. The FCA knows this, and whereas TCF made it the regulator’s responsibility to go in and figure out whether a company has acted in bad faith, Consumer Duty places the responsibility firmly on the company’s shoulders to ensure their customers are receiving good outcomes and have a clear understanding of the products and services they’re buying.


3. Supervision

This is the area where describing Consumer Duty as ‘TCF with teeth’ comes to life.  Up to now, firms have provided complaints data as an indicator of customer outcomes.  The assumption there is that because someone has not complained, they’re realising good outcomes.  It’s clear this inference is wildly floored and the FCA has made moves to address it. 


Under Consumer Duty, firms will – for each product – need to define the customer journey and what a good outcome is.  They’ll then have to show, using data, that customers continue to achieve this outcome over the whole customer lifetime, even when their circumstances change.


You could argue that supervision under Consumer Duty might start to feel more like a section 166 skilled person’s review.  Under TCF, a review by the regulator mainly focussed on senior management, processes and controls, not the raw data from, for example, customer calls and other forms of communications.


There are many firms out there not even collecting customer data, or if they do, they don’t have an accurate view of what’s contained in it.  That must make for an uncomfortable situation when asked to hand it over to the regulator.


4. Question 

The main question being asked by the regulator under TCF is ‘Is your TCF framework appropriate.’  Under Consumer Duty, the FCA will be asking ‘are customer outcomes good?’ Outcomes-based supervision is much more difficult to ‘explain away’ which is what was happening under TCF and something the FCA are no longer willing to tolerate. 


In the past, firms could demonstrate to the regulator that all the right policies, training, frameworks and control were in place. What wasn’t being demonstrated clearly was whether these measures were in fact delivering fair outcomes for consumers. Under Consumer Duty, outcomes will be the main focus and senior management and the board will be on the hook should firms fall short. 


Sheldon Mills, a senior executive at the FCA was quoted in the Guardian saying, “Where we identify serious misconduct that breaches that duty, we will use our full range of powers to tackle that … issuing fines, removing permissions and securing redress for consumers. And we will hold firms, including senior managers and boards, to account for delivering these outcomes.”


Clearly the FCA’s patience has run out as fines hit record levels.  And their insistence that firms have board-approved implementation plans by the end of October 2022 shows they’re putting their full weight behind its Consumer Duty mission.  So those that are skeptical, thinking Consumer Duty doesn’t represent much of a departure from TCF, do so at their own peril. The more prudent firms out there will be looking at strategies and technologies to help them meet guidance requirements not just for the Q4 deadline, but well into the future as Consumer Duty beds in.


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