Consumer Duty Board Report

Understanding the Consumer Duty Board Report

Fundamental Requirements

The report is an annual obligation for a firm’s board to review and approve. It confirms that the firm complies with Consumer Duty and aligns its business strategy accordingly. The FCA will scrutinise these reports and may request underlying evidence to support conclusions and actions.

Continuous Monitoring

To avoid the report being a once-a-year activity, robust governance should ensure continuous monitoring and progress tracking throughout the year. Regular updates through internal governance committees make compliance a continuous process rather than an annual tick the box task.

Board Reporting requirements

All in-scope firms must demonstrate compliance with Principle 12 (deliver good outcomes for retail customers) and PRIN 2A of the FCA Handbook through their annual board report. The report should detail the monitoring results of customer outcomes, identify any risks, and outline remedial actions. The board must review and approve the report, confirm compliance, and assess the alignment of the firm’s strategy with the Duty.

Essential Elements of the Consumer Duty Board Report

1. Introduction

• Overview: Explain the purpose and context of the report.

• Firm’s Responsibility: State the necessity of preparing an evidence-based report.

• Board’s Responsibilities: Highlight the Board’s roles in reviewing, approving, and ensuring compliance.

2. In-Scope Products and Services

• Scope Definition: List products and services under the Duty’s scope.

• Role in Value Chain: Define the firm’s role (sole manufacturer, co-manufacturer, distributor) for each product/service.

3. Executive Summary

• Monitoring Activities: Provide an overview of monitoring activities and key actions taken.

• Business Strategy Alignment: Summarise how the firm’s strategy aligns with Consumer Duty.

• Gap Analysis and Risk Assessment: Outline actions from these assessments.

• Concerns and Mitigation: Highlight concerns and steps to mitigate them.

• Key Changes and Initiatives: Describe key changes and initiatives for improvement.

• Challenges: Summarise challenges faced in implementing Consumer Duty.

• Staff Training: Include an overview of staff training related to Consumer Duty.

4. Monitoring Activity Summary

• Cross-Cutting Rules: Summarise adherence to rules (acting in good faith, avoiding foreseeable harm, supporting customers’ financial objectives).

• Define RAG:

  • Red: risks and gaps which are likely to cause material harm to the firm’s customers and require urgent remediation;

  • Amber: risks and gaps that could have the potential to cause harm to the firm’s customers and should be addressed as soon as possible;

  • Green: no particular risks or issues identified.

• Key Metrics and remediation: Include metrics, risks/gaps, remediation steps, deadlines, owners, and RAG status.

5. Products and Services Outcome

The products and services outcome rules are central to firms acting to deliver good outcomes. They set out a range of requirements, including the need for relevant firms to: 

• ensure that the design of the product or service meets the needs, characteristics and objectives of customers in the identified target market;

• ensure that the intended distribution strategy for the product or service is appropriate for the target market; 

• carry out regular reviews to ensure that the product or service continues to meet the needs, characteristics and objectives of the target market. 

Describe how product/service design meets customer needs and distribution strategy appropriateness.

Summary of the key controls that the Firm executes to meet the outcome (e.g. product review, new business initiatives process, customer journeys design, target customer groups assessment, vulnerable customers etc.) 

• Metrics and remediation:

  • Key metrics

  • Risks/gaps

  • Remediation steps

  • Deadlines

  • Owners

  • RAG status.

6. Price and Value Outcome

The specific focus of the price and value outcome rules is on ensuring the price the customer pays for a product or service is reasonable compared to the overall benefits (the nature, quality and benefits the customer will experience considering all these factors). Value needs to be considered in the round and low prices do not always mean fair value. 

Summary of the key controls that the Firm executes to meet the outcome (e.g. competitor fees and charges analysis, fees incurred across the distribution chain assessment, fee model changes governance, fees levied fairly across all customer segments etc.) 

• Metrics and remediation:

  • Key metrics

  • Risks/gaps

  • Remediation steps

  • Deadlines

  • Owners

  • RAG status.

7. Consumer Understanding Outcome

Consumer understanding outcome rules retain the obligation under Principle 7 for firms to communicate information in a way which is clear, fair and not misleading. But they also build on, and go further than, Principle 7 by requiring firms to: 

• support their customers’ understanding by ensuring that their communications meet the information needs of customers, are likely to be understood by customers intended to receive the communication, and equip them to make decisions that are effective, timely and properly informed;

• tailor communications taking into account the characteristics of the customers intended to receive the communication – including any characteristics of vulnerability, the complexity of products, the communication channel used, and the role of the firm; 

• when interacting directly with a customer on a one-to-one basis, where appropriate, tailor communications to meet the information needs of the customer, and ask them if they understand the information and have any further questions;

• test, monitor and adapt communications to support understanding and good outcomes for customers. 

Summary of the key controls that the Firm executes to meet the outcome (e.g. information accessibility requirements, communication style controls by channel, communication channel options suitable for target customer segments, clear information about product and services etc.) 

•  Metrics and Remediation:

  • Key metrics

  • Risks/gaps

  • Remediation steps

  • Deadlines

  • Owners

  • RAG status.

8. Customer Support Outcome

The Consumer support outcome rules set overarching requirements in relation to the support firms provide their customers. They should be read in conjunction with other rules that cover specific elements of the servicing of customers, such as the Dispute resolution: Complaints (DISP) rules. They require firms to: 

• design and deliver support that meets the needs of customers, including those with characteristics of vulnerability; 

• ensure that customers can use their products as reasonably anticipated; 

• ensure they include appropriate friction in customer journeys to mitigate the risk of harm and give customers sufficient opportunity to understand and assess their options, including any risks; 

• ensure that customers do not face unreasonable barriers (including unreasonable additional costs) during the lifecycle of a product or service; 

• monitor the quality of the support they are offering, looking for evidence that may indicate areas where they fall short of the outcome, and act promptly to address these; 

• ensure they do not disadvantage particular groups of customers, including those with characteristics of vulnerability

Summary of the key controls that the Firm executes to meet the outcome (e.g. staff training, customer service QA, call waiting times, email response times, complaints analysis, customer satisfaction surveys, controls to prevent sludge practices etc.)  

• Metrics and Remediation:

  • Key metrics

  • Risks/gaps

  • Remediation steps

  • Deadlines

  • Owners

  • RAG status.

    9. Governance

• Summarise governance mechanisms:

  • Strategy

  • Policy

  • Training

  • Consumer Duty champion(s)

  • Governance meetings

  • Oversight of outsourcing providers

  • Testing

  • Reporting.

10. Board Report Conclusion

• Final Assessment: Confirm the Board’s satisfaction with Consumer Duty compliance.

• Agreed Actions: Outline actions to address gaps and deficiencies.

• Signatures: Include signatures from the Chair of the Board and Directors.

Key Questions for effective Consumer Duty Board reporting

Monitoring Results

• What constitutes ‘good’ outcomes, and how are these supported by evidence and governance?

• Are there any data gaps, and what plans are in place to address them?

Actions to Address Risks and Improve Outcomes

• What changes have been implemented post-Duty implementation?

• How has the firm addressed identified risks or poor outcomes?

Business Strategy Impact

• Is the firm’s business strategy aligned with delivering good customer outcomes?

• How will the firm monitor and ensure that poor outcomes are not experienced by specific customer groups?

Recommended Actions to design the Board Report

Determine Roles and Responsibilities

• Clearly define the roles of different lines of defense.

• Ensure clearly appointed risk owners for the relevant metrics areas.

Identify and Test Data

• Ensure the right management information and data support the report.

• Prioritise data build and outcomes testing where necessary.

Develop a Report Plan

• Align all stakeholders on the plan for building the report, from the report skeleton to quality control and testing.

• Leverage existing management information and demonstrate its relevance for Consumer Duty compliance monitoring.

Compliance with Consumer Duty Board Report

Firms must prepare the board report by July 31, 2024. The FCA expects firms to be transparent and thorough, using the board report to assess and evidence how firms provide good outcomes for consumers. The report should not be a “tick box” exercise but a continuous improvement tool.

Preparing for FCA scrutiny

The FCA may request the underlying data used in the Consumer Duty Board report. Ensure the report and data are accurate and comprehensive. The report will be used by the FCA’s supervision team to monitor firm progress and compliance.

• Engage with the Board early and keep them informed about deadlines.

• Schedule regular updates and checkpoints to review progress.

• Seek input from stakeholders and conduct a dry run to refine the report.

Consumer Duty Board Report Template

Writing your first annual Consumer Duty Board report can be daunting. Our Consumer Duty Board Report Template helps create a comprehensive report underpinned by a robust methodology.

If you would like a copy of our Consumer Duty Board Report Template, please get in touch.

For further assistance or other compliance enquiries, please contact our regulatory compliance advisory team.

Consumer Duty Board Report FAQ

Q. What is a Consumer Duty Board Report?

A. The Consumer Duty Board Report is an annual evidence-based report required by the FCA to confirm a firm's compliance with Consumer Duty obligations and alignment of its business strategy.

Q. Why is the Consumer Duty Board Report important?

A. The report ensures firms are meeting the FCA’s Consumer Duty requirements, aiming to deliver good outcomes for retail customers and maintain regulatory compliance.

Q. What are the fundamental requirements of a Consumer Duty Board Report?

A. The report must confirm compliance with Consumer Duty, demonstrate alignment with business strategy, and include evidence supporting conclusions and actions.

Q. How often must a Consumer Duty Board Report be prepared?

A. The report is an annual requirement, but continuous monitoring and progress tracking are necessary throughout the year.

Q. What should be included in the introduction of the report?

A. The introduction should explain the report's purpose, the firm’s responsibilities, and the board’s role in reviewing, approving, and ensuring compliance.

Q. What are the key elements to include under 'In-Scope Products and Services'?

A. List the products and services under the Duty’s scope and define the firm's role in the value chain for each product or service.

Q. What should the Executive Summary of the report cover?

A. The Executive Summary should include monitoring activities, business strategy alignment, gap analysis, risk assessment, key changes, initiatives, challenges, and staff training.

Q. How should firms approach continuous monitoring?

A. Firms should ensure robust governance, regular updates through internal committees, and continuous progress tracking to avoid a once-a-year compliance mindset.

Q. What are the key metrics to include in the Monitoring Activity Summary?

A. Key metrics, risks/gaps, remediation steps, deadlines, owners, and RAG status (Red, Amber, Green) should be included.

Q. What are the 'Products and Services Outcome' requirements?

A. Firms must ensure products/services meet customer needs, have an appropriate distribution strategy, and are regularly reviewed for continued relevance to the target market.

Q. How should firms demonstrate compliance with the 'Price and Value Outcome'?

A. Firms must ensure the price paid by customers is reasonable relative to the benefits, considering factors like competitor analysis and fee structures.

Q. What should firms do to comply with the 'Consumer Understanding Outcome'?

A. Firms must communicate clearly, tailor messages to customer needs, and test, monitor, and adapt communications to support customer understanding and decision-making.

Q. What are the requirements under the 'Customer Support Outcome'?

A. Firms must design support that meets customer needs, avoid unreasonable barriers, monitor support quality, and address any areas where they fall short.

Q. How can firms ensure effective governance for Consumer Duty compliance?

A. Firms should have clear governance mechanisms including strategy, policy, training, designated Consumer Duty champions, and regular governance meetings.

Q. What is the role of the Board in the Consumer Duty Board Report?

A. The Board must review and approve the report, confirm compliance, and ensure the firm's strategy aligns with Consumer Duty principles.

Q. What steps should firms take to prepare for FCA scrutiny?

A. Firms should ensure accurate and comprehensive data, keep the Board informed, and schedule regular updates and checkpoints to review progress.

Q. What are the recommended actions to design an effective Board Report?

A. Define roles and responsibilities, identify and test data, and develop a report plan aligning all stakeholders from report creation to quality control.

Q. How should firms address identified risks or poor outcomes?

A. Implement changes post-Duty implementation, address risks, and ensure the business strategy aligns with delivering good customer outcomes.

Q. What deadlines must firms meet for the Consumer Duty Board Report?

A. Firms must prepare the report by July 31, 2024, ensuring it is thorough and transparent for FCA review.