After over a year since it was announced, the Consumer Duty legislation finally came into effect in the UK this week. How will it impact the RegTech space?
The new Consumer Duty regulation aims to ensure customers receive communications from financial services firms that they understand. It also ensures they are offered products that meet their needs. It officially came into effect on 31 July.
This new legislation, first and foremost, is about simplifying the experience for the customer in the financial services space – an area that can easily be fraught with jargon and bluster. In the area of RegTech, this is no different, with Consumer Duty expected to play a key role.
“The RegTech marketplace has always been responsive to regulatory change and the introduction of the new Consumer Duty at the end of July 2023 will be no exception,” said Theta Lake senior regulatory intelligence expert Susannah Hammond.
In the opinion of Hammond, the Consumer Duty is a significant shift in regulatory expectations and will apply to new and existing products and services that are open for sale or renewal. RegTech solutions need to not only help enable compliance with the new requirements, but also enable the evidencing of that compliance.
Back in June this year, in order to help businesses in the final stages of preparing for the Consumer Duty, the UK FCA published a ten-point checklist to help companies identify gaps or areas for improvement.
The FCA was clear that firms can expect to be asked questions like those in the checklist in their interactions with the regulator. Hammond explained that what is also clear is that the FCA has placed communications – and communications compliance – at the heart of how it expects firms to have built their strategic approach to the Consumer Duty.
“Specifically, firms need to not only have robust recordkeeping in place for all relevant communications but also the capacity to comprehensively evidence surveillance and the basis for any follow up actions,” she remarked.