Why social landlords need to be addressing the FCA’s new Consumer Duty rules now

So, what is the Consumer Duty and what do providers need to know? The Consumer Duty represents a fundamental shift in what the FCA expects from regulated organisations. It introduces a new consumer principle that requires all providers of financial services to “deliver good outcomes for retail customers” – with ‘retail’ effectively covering any individual customers. 

The idea is to create a higher standard of consumer protection and reduce the risk of harm to consumers. While the implications of the new rules will be much more onerous for larger financial institutions, it doesn’t mean housing providers can ignore it.

“Fundamentally the FCA wants regulated bodies to treat customers fairly and, as this is part of the ethos of most housing providers, this should be achievable”

At its heart, the Consumer Duty is underpinned by four outcomes, which describe the level of service and positive results providers should deliver for their clients, namely: consumer understanding, products and services, consumer support, and price and value.

Fundamentally the FCA wants regulated bodies to treat customers fairly and, as this is part of the ethos of most housing providers, this should be achievable. The FCA is imposing a new approach to consumers that will involve measuring or collecting data as to how consumers are being treated, how products are working, whether products are appropriate for them and if any changes need to be made. The approach will differ for each housing provider depending on the level and type of regulated activities undertaken.

The work involved could be substantial, and I am advising clients to look at this now if they have not started already. Housing providers need to come up with an implementation plan of how they are going to comply with the new duty and how they will measure the outcomes for consumers.

The FCA has previously advised that boards should have started to look at implementation plans in October last year, so time is of the essence. While there are two deadlines – July this year for ‘open products’ and July 2024 for ‘closed products’ which are no longer offered – housing associations realistically need to be ready for this in July this year as many have a mixture of open and closed portfolios.

“The FCA has suggested that organisations could appoint a ‘consumer champion’ to flag issues to the board and to ensure that any strategies are being implemented”

Of course, some social landlords offer financial advice while others lend money to residents. Consequently, no approach to the new duty from one organisation to another will be the same.

The FCA has made it clear that an organisation’s board should be actively aware of the Consumer Duty and be involved in the implementation approach. It has also suggested that organisations could appoint a ‘consumer champion’ to flag issues to the board and to ensure that any strategies are being implemented.

The good news is that the FCA is expected to take a proportionate approach. It would be very unlikely for the FCA to take action against a landlord in relation to minor breaches but it’s still important not to ignore the new duty. Time is running out to comply and organisations should look to address this now before it is too late.

Alice Overton, partner, Devonshires