Twelve Days of Consumer Duty #10: more than just TCF

It’s day 10 of our Twelve Days of Consumer Duty exploring key questions midway through firms’ implementation journeys.  

Today’s question

“Isn’t this all just TCF?!”

The answer

No!  It’s more.  In short: the new regime has a much wider application and is more onerous; you can be in scope even without a direct retail relationships; it converts some existing guidance into newly enforceable rules; and there is individual regulatory risk via a new conduct rule.

In more detail:

• The FCA has turned a significant amount of guidance (e.g. re vulnerable customers) into enforceable rules.  We expect rapid supervisory intervention post-implementation. 
• The relevant “products” are scoped more widely.  It includes services more comprehensively than PROD, which only captures MiFID financial instruments.  So, for example, sales of FX to retail customers are in scope.
• There’s a wider scope of “retail customers” (vs clients in PROD).  It tracks the relevant FCA sourcebooks and therefore pulls in customers you wouldn’t expect e.g. micro-enterprises in BCOBS, overseas customers under COBS.  Plus you have obligations even within a direct contractual relationship with retail customers.
• The Consumer Duty requires a more sophisticated segmentation of the target market.
• There are wider definitions of “manufacturing” and “distributing”, for example, distribution includes advising and arranging. Manufacture is also defined very inclusively. 
• The price and value outcome is new to many (excluding those in the asset management/insurance space for whom there are already some value assessment requirements).
• There are extensive new requirements to test and monitor customer communications and customer outcomes and exchange the results with others in the distribution chain.
• Existing MiFID II rules impose less detailed obligations on distributors – and the Consumer Duty contains more onerous requirements to share information between firms in a distribution chain (and even with the FCA).
• There are new requirements to conduct root cause analysis and carry out internal and external remediation.
• There’s a new COCON Rule 6 requiring individuals to act to deliver good outcomes for retail customers, and it’s more onerous for more senior individuals.
• There are new processes for root cause analysis and remediation
• For non-retail-facing teams or firms, it can be difficult to communicate the extent of the look through. There is a significant cultural shift here as we have said. Consumers are now everyone’s responsibility to some degree, and the old retail/wholesale divide is less robust that it used to be.  

Want more?

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