In this blog, we describe the Consumer Duty introduced by the Financial Conduct Authority (FCA) in 2022 and the relevance of the principles to companies that may not be regulated by the FCA. Read on to find out how the principles may improve your practice as a non-executive director and contribute to the long-term success of the companies which you serve.
What is the FCA Consumer Duty?
The FCA Consumer Duty is a set of principles that the Financial Conduct Authority (FCA) expects regulated firms to follow when interacting with their retail customers. These duties are designed to ensure that consumers are treated fairly and that they have access to relevant information to make informed decisions about financial products and services.
The FCA Consumer Duty consist of six principles:
- Principle 1: Prioritising the interests of the consumer
- Principle 2: Paying due regard to the fair treatment of consumers
- Principle 3: Paying due regard to the information needs of consumers
- Principle 4: Ensuring the suitability of advice and selling
- Principle 5: Delivering products and services in an acceptable way
- Principle 6: Handling complaints fairly and promptly
What is the relevance to non-executive directors?
If you are a non-executive director (NED) of a company regulated by the Financial Conduct Authority (FCA), it is important for you to be aware of the role that you play in ensuring that the company is complying with these principles.
As a non-executive director, you have a responsibility to ensure that the company complies with the FCA Consumer Duty and that it has systems and controls in place to ensure that it is able to meet the requirements of these duties. You should also be aware of the principles of the FCA Consumer Duty and ensure that you are acting in a way that is consistent with these principles when interacting with customers.
Failure to comply with the FCA Consumer Duty can result in regulatory action being taken against the company (and potentially you as a director).
In addition to helping to ensure compliance with regulatory requirements, adhering to the FCA Consumer Duty can also have broader benefits. By treating customers fairly and ethically, the company can build trust and confidence with its customers, which can help to foster long-term relationships and contribute to the company’s overall success.
Related post: Stakeholder engagement: clients and customers
What can you learn as a NED serving on a board outside the financial services industry?
As a non-executive director (NED), you may be serving on a board in an industry that is not regulated by the Financial Conduct Authority (FCA). However, this does not mean that the FCA Consumer Duty is not relevant to you. There are still several things that you can learn from these principles.
For example, the principles of the FCA Consumer Duty, such as prioritising the interests of the consumer and paying due regard to the fair treatment of consumers, can be applied to any industry. These principles can serve as a best practice guide for companies in any industry that are looking to ensure that they are treating their customers fairly and ethically.
In addition, the FCA Consumer Duty can serve as a benchmark for companies to compare their own practices against. By comparing their own policies and procedures, companies can identify any areas where they may be falling short and take steps to address any issues.
The FCA Consumer Duty provides valuable guidance for non-executive directors on how to ensure that customers are treated fairly and ethically, regardless of the industry in which they are operating. By applying these principles to your own company, you can help to foster trust and confidence with your customers and contribute to the long-term success of the company.
Written by Elise Perraud, NEDonBoard COO
Want to know more?
- New to the NED role? Watch our acclaimed webinar, How to secure your first non-executive director role.
- Looking for training to develop your NED skills and knowledge further, including stakeholder engagement? Please visit our training course pages.
- Already on a board? Join NEDonBoard, the Institute of Board Members as a member or contact [email protected] for training opportunities aligned with your objectives and aspirations.