The Financial Conduct Authority (FCA) has welcomed improvements made by the UK financial services industry a year after the launch of its Consumer Duty.

At an event marking the anniversary of the regulation, the FCA’s executive director of consumers and competition Sheldon Mills said that the regulation is already having a “tangible impact” on consumer outcomes.

“And it has been driving improvements in firm culture, conduct and governance, too, which over time will drive better outcomes still,” continued Mills.

Consumer Duty: how firms have responded

Following the launch of its Consumer Duty, the FCA said it has seen firms act more quickly to increase rates following base rate increases, with the base rate rising by 0.25ppt between July 2023 and February 2024.

Estimates suggest that consumers will get roughly an additional £4 billion in interest payments per year due to firms increasing rates for easy access deposits by 0.45ppt on average over the period.

The regulator went on to say that it anticipates its intervention on GAP products, where the it asked firms to look at their commission structures, will see firms make changes to improve the value of GAP insurance which could save their customers around £70 million.

The FCA also praised an unnamed larger financial advice firm which is making "significant changes" to its business model to simplify and unbundle its charging structure.

Following the authority's work on the treatment of interest on cash balances by platform investment providers, the vast majority of firms written to as part of the sample have stopped "double dipping" or making a return on interest retention as well as charging customers for custody of cash.

The UK watchdog said that by aggregating the impact across 13 of the firms that have stopped this practice, it estimates this will put around £10 million annually in fees back in customers’ pockets.

Data and metrics

Mills said that firms the FCA has spoken to have developed new data and metrics to better understand their customers, for example to track customers who fall outside of their target market, allowing them to conduct outreach or implement intervention measures.

"Others still have improved the way they capture and record information about customer vulnerabilities and expand support to better meet customer needs by adopting a ‘tell us once’ approach," he continued.

Outliers

While the FCA has largely praised the industry's response to its Consumer Duty over the past 12 months, during a panel discussion the organisation's joint executive director of enforcement and market oversight said that the regulator could approach a firm if it is a "clear outlier" in the way it operates.

According to The FT Advisor, which was in attendance at the event, Therese Chambers said that the FCA's first step in its programme of work has "absolutely not been to reach for the big stick".

However, she said that while being an outlier isn't necessary a bad thing, it will be important for the FCA to understand why a firm is in that position.

“If in fact, there wasn't a fantastic reason for that gap between a firm and its peers, we would expect a firm to be responding in a positive and constructive way to the feedback that we give," she continued. “So basically, what I'm saying is, if we see a problem, we'll call it out, we'll ask you to fix it. If you don't fix it, I might be knocking on your door."

The Financial Ombudsman's view

Speaking today at the FCA’s Consumer Duty: 1 Year On event, Abby Thomas, chief ombudsman and chief executive at the Financial Ombudsman Service said that over the past year it has continued to take action where it thinks businesses haven’t treated customers fairly and in line with the requirements under the Duty.

“I urge firms to ask themselves whether they’re supporting their customers in the way they’d expect to be supported in the circumstances," she continued. "We want to help firms resolve complaints fairly first time, without the need for a case to come to us, which is why we share insight for businesses to identify ways to improve their systems or processes.

"This should reduce more complaints further down the line."

Thomas went on to say that since the Consumer Duty came in to force, the service has been able to reduce the median time it takes to resolve a case from 4.8 months in 2022/23 to around three months in 2023/24.

The FCA's anniversary event comes after it announced this week a comprehensive review of financial services rules, aiming to reduce regulatory burdens on firms and support economic growth.

The regulator said it is calling on the industry to identify rules that could be removed or simplified if they overlap with the Consumer Duty.

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