From July 31 2024, the scope of the consumer duty will be extended to apply to closed products and services.
Companies must also produce their first annual board report assessing implementation by this date.
While closed products will have the same expectations as their open-ended counterparts, the road to compliance has laid bare a unique set of challenges.
Closed products: a challenge and an opportunity
Closed products are more likely to be held on outdated infrastructure that often lacks the same functionality and data as their open-ended equivalents, complicating the collection and analysis of customer data.
However, companies should remember that the consumer duty is not a “once and done” regulation, making upfront investment in the right tools, systems and resources an imperative to ensure data can be extracted, tested and assessed on an ongoing basis.
Also, as the Financial Conduct Authority has previously outlined older, more complex products, legacy systems and gaps in data have the greatest potential to impact consumer service and outcomes.
This is especially likely if inadequate record keeping has taken place, or a lack of information has been passed down distribution chains.
It is therefore in a company’s interest to embed good practices across business lines responsible for closed products and challenge the extent to which steps are being taken to achieve good outcomes for customers on an ongoing basis.
However, this is not the only hurdle facing companies on the path to closed product compliance.
In-scope businesses also need to communicate the reasons why these solutions were restricted to new customers, while continuing to evidence the fair value they provide to existing customers.
For example, companies run the risk of inadvertently demonstrating poor consumer outcomes if a product was closed due to inadequate design or inefficient technology.
But if they can demonstrate that learnings were taken away from these instances, and higher standards applied, they can continue to showcase their commitment to the philosophy underpinning the consumer duty.
Despite the complexities associated with the closed product deadline, companies should remind themselves that the consumer duty is not just in the interest of customers, but of themselves too.
In the context of closed products, this could mean using the compliance process to support initiatives that simplify and streamline product offerings.
By leveraging the data that is primarily being collected to evidence consumer duty outcomes, companies can also ensure legacy products continue to align with the overall business strategy and cut down the time and resources needed for lengthy product remediation.
As the saying goes, where there is a will there is a way, and the companies that challenge themselves to create workarounds by innovating and adapting their strategies to effectively manage and refresh closed products are likely to be successful in the end.
