The Consumer Duty – the consumer support outcome

Support given by firms can enable consumers to make the most of the products and services they buy – realise the value and benefits, allowing consumers to pursue their financial objectives and ensure they can act in their own interests. CP21/36, A new Consumer Duty: feedback to CP21/13 and further consultation (issued on 7 December 2021), says that a product or service that a customer cannot properly use and enjoy is unlikely to offer fair value. These are the underlying concerns and objectives the Financial Conduct Authority is seeking to address through the consumer support outcome rules, support being wider than customer service with the implication of post-sale service. The rules require firms to:

  • Consider the support their customers need and make sure their customer service meets those needs;
  • Support their customers in a way that takes their needs into account, such as by not designing processes with unreasonable barriers that prevent consumers realising the benefits of the product or service, or acting in their interests, including by imposing unreasonable additional monetary and non-monetary costs on consumers;
  • Monitor the quality of the support they’re offering, looking for evidence that may indicate areas where they fall short of the standard required under the outcome, and act promptly to address those; and
  • Ensure they don’t disadvantage particular groups of customers, including those with characteristics of vulnerability.

My view is that there are fewer points in relation to this outcome that are likely to be contentious than there are in relation to other outcomes but there are still points to note.

Unreasonable additional costs

CP21/36 makes it clear that support provided shouldn’t result in a product or service costing more than the customer expected up-front, but unreasonable additional costs include not only unreasonable charges, but also time, distress, inconvenience and provision of personal data. This will be music to the ears of any consumer who has spent time waiting to speak to someone in the customer service department, being put on hold or having a call transferred or disconnected; CP21/36 contains a fairly comprehensive list of gripes along these lines. However, firms will need to consider the following points:

  • Firms will have to establish how much time it’s reasonable for consumers to spend on different aspects of customer service/support, how much inconvenience it’s reasonable for consumers to tolerate and how much (and what) personal data consumers can reasonably be expected to provide in different scenarios that might arise. It’s necessary to set these various reference points in order to determine whether time spent, inconvenience and provision of personal data represent an ‘unreasonable cost’ in different situations. I’m assuming that consumers suffering distress as a result of something the firm does or doesn’t do won’t, generally, be regarded as a reasonable cost, although consumers might be distressed (for reasons unconnected with the firm and its actions) when they make contact with the firm.
  • This work will also need to be considered in the context of consumers with characteristics of vulnerability and consumers with protected characteristics under the Equality Act 2010.
  • It’s unclear how the consumer support outcome rules in relation to unreasonable additional costs are to interact with complaint-handling and whether redress will need to be provided to any customer who, for instance, is required to spend an unreasonable amount of time on an aspect of customer service or support – see also, below, in relation to Monitoring. Bear in mind, too, that the FCA appears to be looking for a step-change in relation to complaint-handling, aligned with the Consumer Duty. It might well follow that this step-change will extend to redress being provided to customers in these circumstances.
  • Firms will need to consider, when designing products and services and consumer support processes, whether the ‘costs’ likely to be incurred by the customer are reasonable. The results of monitoring work regarding the consumer support outcome will need to be fed into review of product and service design and consumer support processes.

Unreasonable barriers

Unreasonable additional costs are one aspect of what CP21/36 refers to as ‘unreasonable barriers’ to fully using and enjoying a product or service. Firms are to make it at least as easy to switch product, leave the service or make a change as it is to buy the product or service in the first place – and there’s particular focus on customers being able to exit a product or service easily. There isn’t quite as much acknowledgement as I’d like to see that exiting a fixed-term product before the end of the agreed term involves terminating the product before the agreed contractual end-date. CP21/36 refers to the need to clearly draw early termination provisions to consumers’ attention in line with the consumer understanding outcome rules and guidance but there’s a residual overtone that customers shouldn’t be expected to incur exit charges. Expect to hear more about this, and whether exit charges are unfair, once the Consumer Duty provisions have come into effect – absent, clarification in the meantime.

Identifying customers’ support needs

As with the other consumer outcomes, identifying the target market for a product or service and the needs of that target market are important; consumer support processes have to be designed to meet those needs. There is, perhaps, a little less emphasis under this outcome on identifying particular customer groups and their specific needs although the needs of customers with characteristics of vulnerability or protected characteristics under the Equality Act will need to be identified. Two points to consider:

  • It’s an obvious point, but customer support processes will need to be designed – thought through, with a rationale for the decisions made, by reference to customer needs that have been identified.
  • Those processes will need to allow firms to identify customers with vulnerable characteristics. If, for instance, an online chat feature were the only channel of communication provided by a firm for customers to use, would that allow the firm to recognise where a customer is in vulnerable circumstances? How could the firm be confident that’s the case?

Channels of communication

Although the draft guidance in CP21/36 acknowledges that firms can use a single communication channel where that’s appropriate, the steer seems to be that providing alternative channels is more likely to meet consumers’ needs as they offer the consumer a choice. I think a message is being given here to firms that operate – or intend to operate – on a digital and/or phone basis to the exclusion of other communication channels. There’s reference in the draft guidance to firms potentially needing to consider how support can be provided to consumers who have lost access to phone services (and bear in mind that this might also result in digital exclusion).

Interruptions in service and other service problems

Service difficulties and interruptions in service range from delays due to unforeseeable peaks in demand through to full outages. CP21/36 acknowledges that there can be long wait times occasionally, that it might be appropriate to prioritise some calls over others at times of high demand, systems might be down for routine maintenance or upgrade and there can be exceptional events that affect operational resilience. However:

  • CP21/36 refers, specifically, to the operational resilience requirements coming into effect in 2022 and I read that as a clear message to firms that FCA (and PRA) operational resilience requirements need to be implemented quickly; and
  • There’s also reference to firms being required, under SYSC, to have systems and controls in place to effectively manage the business.

Taken together, I read this as limited tolerance, on the part of the FCA, for firms being unable to provide support to customers due to systems and operational difficulties.

Outsourcing of consumer support services

Consistent with regulatory principles, firms remain responsible for consumer support services where those are provided by another person. Any existing or new outsourcing arrangements will need to provide for the firm to meet the standards required under the consumer support outcome rules and the Consumer Duty more generally. Appropriate oversight arrangements will also need to be in place.

Monitoring

The objective, here, is to establish whether support firms provide enables customers to realise the benefits of products or services and act in their interests without unreasonable barriers, including unreasonable additional costs. Some points to consider are set out below.

  • Firms will need to decide what information they need in order to carry out this exercise. This could be information they already collect but adjustments might be needed in order for the information to be suitable, tailored to the standards set by the firm to meet the consumer support outcome rules.
  • The work extends to customers as a whole, but also groups of customers who might be identified from the monitoring work or customer groups identified in advance. Customers with characteristics of vulnerability will need to be considered in this context.
  • There’s reference, in CP21/36, to redress being provided to customers where appropriate – see also, above, in relation to Unreasonable additional costs.

Governance

As with the other consumer outcomes, firms will need to put in place a governance framework that allocates responsibilities, provides oversight, sets policy, defines procedures, makes and evidences both decisions and decision-making, provides for management information and specifies the monitoring programme. That framework will also need to fit with the governance frameworks for other consumer outcomes and the Consumer Duty more generally.

This article is intended to provide general information about recent and expected items that might be of interest. It does not provide or constitute, or purport to provide or constitute, advice relevant to any particular circumstances. Legal or other professional advice relevant to any particular circumstances should always be sought.

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