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What has happened?

In February 2023, the FCA issued a Dear CEO letter to firms authorised or registered under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011, such as payment institutions, Electronic Money institutions and Registered Account Information Service Providers, to help them implement and embed the Consumer Duty effectively.

What are the key points?

• A reminder of the implementation timeline, the key elements of the Duty and how it applies to payments firms,
• The FCA’s expectations on how payments firms should embed the Duty, including examples of good and poor practice,
• Feedback from a recent review of firms’ implementation plans, and
• The FCA’s approach to supervising the Duty in the payments portfolio and its planned next steps.

The FCA has identified three key areas where firms should particularly focus their attention during the second half of the implementation period, running until to 31 July 2023:

•    Effective prioritisation: The FCA has seen some plans where it was not clear what the basis was for prioritising some implementation work ahead of other aspects. Firms should make sure they are prioritising appropriately, focusing on reducing the risk of poor consumer outcomes and assessing where they are likely to be furthest away from the requirements of the Duty.

•    Embedding the substantive requirements: The FCA has seen some plans that suggested firms may have considered the requirements superficially or are over-confident that their existing policies and processes will be adequate. It is asking firms to carefully consider the substantive requirements of the Duty so that when they are reviewing their products and services, communications and customer journeys, they identify and make the changes needed to meet the new standards.

•    Working with other firms: To implement the Duty on time, many firms need to work and share information with other firms in the distribution chain. Some firms may need to accelerate their work on this important aspect of implementation.

As part of this work, the FCA is developing a strategy for payments firms to embed the Duty in its supervision work and tackle key harms, as well as metrics to measure the impact of the Duty on payments firms. 

Larger payments firms should expect to be regularly asked to provide their FCA supervisors with updates on implementation progress and their internal governance papers and minutes, which the FCA will engage with and challenge.

Payments firms of all sizes should be ready for the FCA to include them in engagement. The FCA will also consider a firm’s implementation of the Duty as appropriate and will expect all firms to be able to explain the actions that have been taken to comply with the Duty on request.

How can we help you?

Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to providing assistance as and when needed, our team of specialists can serve as your right hand in meeting and complying with the Payment Services Regulations. We understand the importance of staying up-to-date and compliant and we are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your payment services arrangements, or more general regulatory questions? Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 0207 436 0630 or sending an email to info@thistleinitiatives.co.uk.