| UK & Europe
The last business plan of the FCA’s three-year strategy, this year’s paper takes a breather from announcing another raft of consultations. Instead, it takes a practical look at where the industry should be when it comes to complying with existing regulations, in particular in embedding Consumer Duty. Initial focus is on protecting mass-market customers, but it covers a wide variety of topics – from ARs to EMIR.
Below, we pick up some of the key themes and highlight some future areas of focus. You can also browse our short summary of the plan here: FCA business plan in brief and browse the full FCA document here: FCA Business Plan 2024/25.
Common themes throughout the FCA Business Plan
The FCA published its 2024/25 Business Plan on 19th March – the last plan of its current strategy and the first published following the implementation of Consumer Duty last July. So it’s no surprise to see a lot of detail on the areas it expects firms to be progressing. It also sets out new Supervisory themes. The regulator wants to see what progress firms have made in adjusting to the priorities set out in is strategy over the last two years and is clear on its intentions around business-as-usual regulation as Consumer Duty continues to embed.
More action-oriented than previous years, the plan doesn’t contain much which is particularly new. The FCA appears to be using this year’s plan to spur the industry to direct energy into complying with existing regulations, rather than announcing another set of Discussion Papers or new Consultations.
Whilst comprehensive and wide reaching, there are three broad areas covered:
- Subjects under current focus.
- Areas of future interest.
- Specific matters of customer redress.
Subjects under current focus
As the cost of living continues to bite, the FCA continues to focus on mass-market customers. Their measures cut across a number of areas.
Interest rates
The regulator is looking to ensure savers receive a fair deal on interest rates and are informed of better rates. Firms should also take note of the statement which ICO published last year, setting out its view that a firm should inform customers of better rates, even if the firm has not acquired the customer’s explicit consent to marketing.
Debt and financial difficulty
Changes to mortgages, consumer credit, and overdraft rules will be finalised to help customers in financial difficulty. The FCA also aims to consult on rules on debt advice, with a particular focus on customer vulnerability. Firms in the mortgage and consumer credit sectors should not be surprised if the regulator continues its focus on debt consolidation and ensuring customers are aware of the total charge for credit, not just what they can afford to pay each month. FCA will also be undertaking an impact evaluation following its Credit Card Market Study; the consumer credit sector should definitely expect material changes to FCA regulations over the short to medium term.
Insurance
The plan highlights a particular focus on insurance claims. The experiences customers have when claiming is clearly the most important aspect of holding an insurance policy, since only then does a customer find out if being a policyholder was worth their while.
Inclusion
Firms must ensure customers have access to products and services without un-necessary exclusion, and tackle financial inclusion where it exists.
Improved standards across distribution
Multi-sector and multi-firm work to improve standards. Producers and distributors, essentially all firms in the distribution chain, need to ensure they fully understand and have mapped out the entirety of their customer’s experiences, the conduct risks they’re exposed to and any fees they may be charged.
Areas of future interest
The FCA clearly remains willing to show its teeth in a wide variety of areas, covering both wholesale and retail markets:
Market cleanliness
Market cleanliness remains an important areas for the FCA, and they’ve announced publication of Market Cleanliness Data in Q3 2024 and a forthcoming review of market abuse systems and controls.
Digital journeys
A continued focus for supervision teams will be on digital journeys and sludge practices, so firms at different stages of the distribution chain should make sure they have good control over the conduct risks posed by them and their partners.
Appointed Representatives
The Appointed Representative regime remains an area of focus. The controls a Principal firm is expected to have in place were subject to extensive revision in December 2022 and FCA will continue its analysis of Principal data, taking enforcement action where necessary over high risk Principals.
Protecting firms from failure
Reducing and preventing harm from firm failure remains a priority. This doesn’t only refer to firms likely to become insolvent, in this context a firm’s ‘failure’ includes the failure to comply with the threshold conditions, for example. This is an area where we encourage our clients to conduct annual reviews.
Specific matters of customer redress
Motor finance
FCA recently announced a pause in the deadline for firms having to resolve complaints in the motor finance sector, an action unprecedented in recent memory. This has the potential to be the next ‘mis-selling scandal’ and will again focus the public’s attention on perceived wrongdoing in the financial services industry.
Financial Ombudsman Service
FOS and FCA will continue to cooperate and ensure open working practices through the wider implications framework.
Advice Guidance Boundary Review
Advice is once again under the spotlight, particularly the Advice Guidance Boundary Review and ongoing work in to retirement advice.
Redress
FCA is also planning work on redress guidance for firms and potential updates to complaints reporting. This should be watched with interest as it has the potential for enhanced expectations for redress payments, perhaps over and above what some firms currently offer complainants.
Next steps
As ever, the Business Plan is essential reading for everyone in compliance in the UK.
We’re working with clients on all the issues highlighted above and are always happy to talk through what we’re seeing and how your compliance set up stacks up.
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