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    Consumer Duty and Distribution chains

    By David Petty   | 03/05/2023

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    The latest Consumer Duty deadline has now passed which means that firms who manufacture financial products should have completed all the necessary reviews to ensure their products meet the four outcome rules for their existing open products and services and have shared relevant information with distributors so that they are able to meet their obligations under the Consumer Duty.

    This is an important milestone for all firms operating within a distribution chain so that distributors have time to sufficiently embed any changes before the July 31st deadline. The Consumer Duty applies across the distribution chain, from product and service origination through to distribution and post-sale activities. The Financial Conduct Authority (“FCA”) define ‘distribution chain’ as ‘all firms involved in the manufacture, provision, sale and ongoing administration and management of a product or service to the end retail customer’ (under 2.12 of FG22/5: Final non-Handbook Guidance for firms on the Consumer Duty). This may include firms such as insurers and insurance brokers and lenders and credit brokers (including limited permission firms).

    Under the Consumer Duty, all firms within a distribution chain can be held accountable for failures in processes and interactions that may occur outside their organisational boundaries. This creates a huge shift and focus on ensuring that firms within distribution chains are working cohesively to deliver the proper consumer outcomes. Data published by Ernst & Young LLP in April found 58% of firms they surveyed about Consumer Duty readiness said they did not clearly understand what they will receive from manufacturers of products and how they will use it.

    It’s imperative that firms obtain and understand the information they receive from other firms within their distribution chain and are confident that it will be compliant and compatible to deliver good consumer outcomes.

    Manufacturers should have shared relevant information demonstrating that their existing open products and services ensure that the four outcomes are met. The four outcomes are;

    • Products and Services
    • Price and Value
    • Consumer understanding
    • Consumer support

    You can read more here.

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