From 31st of July, closed-book products and services will be subject to the Consumer Duty. This means that firms must have evaluated their closed book products to ensure they are inline with the rules and principles of the Consumer Duty.
What does ‘closed book’ mean?
Closed products are products and services which were sold before the 31st of July 2023 but have not been marketed or sold to new customers since.
Reviewing closed book products
When reviewing closed books, firms should consider the following:
Initial Review
Firms might start by examining the reasons behind the decision to close the product or service. For example, if a product was closed due to offering poor value compared to newer alternatives, this should be considered in relation to customer outcomes.
Prioritise High-Risk Products
Focus on reviewing products or services with a higher risk of consumer harm. If there have been complaints, particularly regarding price and value, these products should be prioritised.
Review into Existing Cycles
Undertake a review of Consumer Duty elements into existing and ongoing review cycles, ensuring they meet the compliance deadlines for the Consumer Duty.
Review of Similar Products
Firms may group similar products and services together for review. This could involve:
- Analysing cohorts of products or services together.
- Quickly concluding that more recent closed book products or services, which are similar to those still on sale, continue to provide fair value.
Similar products and services, means those intended to meet similar customer needs and with a similar customer base. Firms should assess whether it is appropriate to group the products or services in question, considering the similarity in customer base, complexity, and risk of consumer harm. Products or services shouldn’t be grouped if there is any known issue that could impair an adequate assessment.
Additionally, firms need to consider how to address any harm to customers in these products and services, as outlined in the sections on assessing fair value and actions to address potential harm.
A reminder of the Consumer Duty
The Consumer Duty introduced some key changes which firms must embed into the heart of their business. These included;
- A new Consumer Principle which became Principle 12 of the Principle’s for Businesses.
- Cross-cutting rules which require firms to act in good faith, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives, and;
- Four Outcomes which ensure consumers receive clear communications, products and services meet their needs and offer fair value and the customer support they need.
By introducing the Consumer Duty, the FCA want to raise the standards of consumer protection.
