Consumer Duty

What the Duty asks of us

The communications we send to our customers should be easy to understand, and the products and services we offer should meet their needs. We should always offer fair value, and provide customers with the support they need, when they need it.

Under the Duty we are required to review our products and services and share the details with our distributors, so that they can meet their own obligations.

The three cross-cutting rules

These rules provide greater clarity on the FCA's expectations under the new Principle, and help firms interpret the four outcomes. Firms should take reasonable steps to:

1. Act in good faith towards retail consumers.
2. Avoid causing foreseeable harm to retail consumers.
3. Enable and support retail consumers to pursue their financial objectives.

The four outcomes

These represent key elements of the firm and consumer relationship which are instrumental in helping to drive good outcomes for consumers. The outcomes are focused on:

1. Products and services.
2. Price and value.
3. Consumer understanding.
4. Consumer support.

The cross-cutting rules cut across all four of the outcomes, and you should consider this when putting together your plan. You must ensure everyone in your business is trained on this change.

The requirement for firms to enable and support consumers to pursue their financial objectives does not remove consumers' responsibility for decision making, or in itself prevent consumers from making decisions that are not in their interests. But the FCA expects firms to take responsibility for establishing an environment in which consumers can act in their own interests. Firms must nevertheless understand and take account of behavioural biases, and the impact characteristics of vulnerability can have on consumer needs and decisions.

Manufacturers and distributors

To understand how the Consumer Duty applies to your firm, you first need to understand your role in the consumer's journey.

Manufacturer

Firms that create, develop, design, issue, operate or underwrite a product or service would be regarded as a product manufacturer.

Greenfield Mortgages is a manufacturer of retail bridging lending products.

Distributor

Firms that offer, sell, recommend, advise on, propose or provide a product or service would be regarded as distributors.

Intermediaries are distributors of retail lending products.

The Duty applies across the distribution chain, from product and service origination through to distribution and post-sale activities. By the distribution chain, the FCA means all firms involved in the manufacture, provision, sale and ongoing administration and management of a product or service to the end retail consumer.

What we provide as a manufacturer

The FCA's expectations of manufacturers are set out in PRIN 2A. For each product that we manufacture, we provide our distributors with:

• A detailed overview of the products that we design.
• Assurance that, as part of our design phase, consumers with any characteristics of vulnerability are not adversely impacted by our products.
• Clear guidance on the target market of consumers that we wish to benefit from our products.
• The value that we determine each of our products offers.

We also set out our expectations of how we will want to ensure that our products are distributed to our defined target market, and that distributors can evidence that a consumer understands the financial product they have bought and that it meets their needs.

Sharing information between us

Firms should act to enable and support consumers to pursue their financial objectives at all stages of the consumer journey. The FCA has set out its overall expectations for firms to monitor the outcomes their consumers are experiencing.

Manufacturers must regularly review whether their products and services meet the identified needs, characteristics and objectives of the target market, including any identified for consumers with characteristics of vulnerability; whether the distribution strategy remains appropriate for the target market; and whether products or services have been distributed to consumers in the target market.

Distributors must regularly review whether their distribution arrangements are appropriate and up to date, and whether products and services have been distributed to consumers in the target market.

To support manufacturers' reviews, distributors must, upon request, provide relevant information — including, where appropriate, sales information and information on the regular reviews of their distribution arrangements.