Managing Ongoing Consumer Duty Obligations: The Importance of Outcomes Monitoring and Testing

Consumer Duty implementation has been a significant focus for firms in the financial sector, with regulators emphasizing the ongoing nature of compliance efforts. While the initial deadline for implementation passed, the responsibility for ensuring good consumer outcomes remains a priority. Recent communications from regulatory authorities underline the necessity for firms to continuously assess, test, and improve their practices to meet Consumer Duty obligations effectively.

The Financial Conduct Authority (FCA) has reiterated the importance of firms' commitment to ongoing Consumer Duty compliance. Director Nisha Arora's speech on November 1st, 2023, emphasized the need for firms to go beyond mere implementation and focus on continuously improving consumer outcomes. This highlights the necessity for firms to adopt a proactive approach to Consumer Duty, ensuring that they identify and address any issues promptly.

So, how can firms effectively manage their ongoing Consumer Duty obligations? One crucial aspect is the implementation of an Outcomes Testing Programme (OTP). An OTP serves as a structured framework for monitoring and testing consumer outcomes, providing a systematic approach to assessing and improving practices. Here's what firms need to consider when establishing an OTP:

1. Framework Design: Develop a robust framework for monitoring and testing outcomes, including policies, processes, and testing schedules. This framework should align with the firm's objectives and regulatory requirements, providing clarity on how outcomes will be assessed and addressed.

2. Methodology and Frequency: Define the techniques and frequency of monitoring and testing activities. This should include a mix of quantitative and qualitative methods to comprehensively evaluate consumer outcomes across various touchpoints.

3. End-to-End Assessment: Map the firm's processes for assessing outcomes throughout the customer journey. This includes identifying key stages where consumer outcomes are determined and evaluating the effectiveness of existing controls and processes.

4. Risk-Rated Approach: Implement a risk-rated methodology for assessing the effectiveness of testing outcomes. This involves prioritizing areas of higher risk and allocating resources accordingly to address potential issues promptly.

5. Data Analysis and Feedback: Utilize various data sources, such as customer feedback, social media, and internal management information, to gain insights into consumer outcomes. Analyse this data to identify trends, root causes of poor outcomes, and areas for improvement.

6. Collaboration and Ownership: Foster collaboration between different lines of defence within the organization to ensure comprehensive monitoring and testing of outcomes. This involves active involvement from both frontline staff and senior management to drive accountability and ownership.

7. Cultural Shift: Promote a culture of continuous improvement and consumer-centricity within the organization. Encourage employees to prioritize correcting deficiencies that may lead to consumer harm, emphasizing the importance of Consumer Duty compliance across all levels of the firm.

To kickstart their outcomes testing efforts, firms should focus on defining the structure and objectives of their OTP, identifying key stakeholders, and implementing robust monitoring and testing processes. By proactively addressing gaps and issues, firms can demonstrate their commitment to meeting Consumer Duty obligations and ultimately, fostering better outcomes for consumers.

In conclusion, managing ongoing Consumer Duty obligations requires a proactive and systematic approach to monitoring and testing consumer outcomes. By implementing an effective OTP and fostering a culture of continuous improvement, firms can ensure compliance with regulatory requirements while enhancing the overall consumer experience.