It’s day 7 of our Twelve Days of Consumer Duty exploring key questions midway through firms’ implementation journeys.
“How do we manage Consumer Duty and non-Consumer Duty business within the same organisation (or even for the same customer)?”
You have options, each with its own pros and cons.
Your first option is to only apply the Consumer only to your in-scope business, and not to apply it to out of scope business lines.
The advantage of this is that you’re not imposing a compliance burden that is technically unnecessary.
But there are disadvantages:
- You need to confirm what business is out of scope. The scoping triggers are complex and they’re not sector-specific, so you’ll need to do this carefully and record your decision and reasons. You’ll want to mitigate the risk of the business falling within scope inadvertently in future. It will help to institute contractual provisions and disclaimers in customer-facing communications. You’ll also want to implement arrangements to proactively and rapidly identify if in future a business falls within scope (e.g. due to a change in the business, the product or customers). These are all good ideas anyway as part of your regular Consumer Duty review processes but are more important in this context.
- You’ll need to set up parallel processes and controls for your in-scope business lines and implement robust oversight, challenge and review of these. This could be operationally complex, may be duplicative, and will make demands on your first – and especially second – lines of defence. In practice this arrangement could be difficult – for example, how can you clearly demarcate your Consumer Duty and non-Consumer Duty business with any given customer?
Voluntarily apply the Consumer Duty (or the most salient parts of it in your context) to your non-Consumer Duty business.
This has disadvantages: it’s a voluntary increase in compliance burden, and it might encourage the FCA to attempt to hold you to that standard in future supervisory or enforcement interventions.
But there are advantages:
- It may be operationally easier to apply one framework to all of your products.
- It demonstrates that you’re complying with the “spirit” of the rules – many firms see this as valuable in the context of their ongoing regulatory relationship.
- It protects you where a business line later falls within scope, whether inadvertently or by design.
- It may mitigate your supervisory and enforcement risk: in practice the Consumer Duty will raise the FCA’s expectations across all businesses.
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