General
The FCA believes that consumers can only pursue their financial objectives and act in their own interests where firms support them in using the products and services they have bought. Product support should help customers to meet their needs and provide consumers with the ability to realise the benefits of the products and services they have purchased. [1] A product or service that a customer cannot properly use and enjoy is unlikely to offer fair value.[2]
A good rule of thumb for firms is to ask themselves whether they are applying the same consumer support standards to deliver good customer outcomes as they do to help generate sales and revenue.[3] It should be at least as easy to switch out of a product, leave a service or make a change, as it is to buy in the first place.[4]
Application of the consumer support outcome
The customer support outcome applies to:
- ALL FIRMS who are responsible for interacting directly with, and providing support to, retail customers (including where the firm outsources (in whole or in part) its interactions with retail customers to a third party),
- REGARDLESS OF THE CHANNEL USED when interacting with, or providing support to, retail customers, and
- ALL SUPPORT PROVIDED by a firm to retail customers, whether before, during or after any sale of a product and whether or not related to a specific product.[5]
Design and delivery of customer support
A firm must design and deliver support to retail customers such that it:
- meets the needs of retail customers (including those with characteristics of vulnerability),
- ensures that retail customers can use their product as reasonably anticipated,
- ensures that it includes appropriate friction in its customer journeys to mitigate the risk of harm and give retail customers sufficient opportunity to understand and assess their options (and any risks),
- ensures that retail customers do not face unreasonable barriers (including unreasonable additional costs) during the lifecycle of a product, such as when they want to (a) make general enquiries or requests to the firm, (b) amend or switch a product, (c) transfer to a new product provider, (d) access a benefit which the product is intended to provide, (e) submit a claim, (f) make a complaint, or (g) terminate their relationship with the firm,[6]
- does not disadvantage particular groups of customers (including those with characteristics of vulnerability), and
- enables the firm to monitor the quality of the support they are offering, providing evidence that may indicate areas where the firm falls short of the outcome.[7]
Appropriate friction and unreasonable barriers
Firms should consider the purpose, and impacts, of friction points in the design, delivery and review of their customer journeys. Any additional steps in customer journeys should not be overly complicated or designed in a way that benefits firms but not customers.[8]
In some circumstances, positive friction points or nudges can help to mitigate the risk of consumer harm and support good outcomes. However, there can be commercial incentives for firms to create friction points (often called ‘sludge’) that deter their customers from taking action in their interests, such as making a complaint or switching product or provider.[9]
The FCA expects firms to be able to justify and evidence the customer benefits of additional steps in customer journeys. This necessitates monitoring of friction points. Monitoring of friction points will also help firms to understand how processes are working in practice and the outcomes they are delivering.
Unreasonable additional costs
“Unreasonable additional costs” include unreasonable exit fees or other charges, delays, distress or inconvenience.[10]
The support firms provide should not lead to unreasonable additional costs (in other words, it should not result in the product costing more than customers expected up-front).[11]
In general, an exit fee is more likely to be reasonable if it is commensurate with the costs incurred by the firm due to the customer terminating the agreement early. Any material provisions relating to early termination, including exit fees, should also be clearly drawn to customers’ attention.[12]
Reasonableness in the context of the consumer support outcome
The consumer support outcome applies based on what is “reasonable”. This will depend on the nature of the product, the characteristics of the customers, and the role of the firm. In practical terms, this means that firms are not expected to always communicate and provide support through each individual customer’s preferred channel. However, the FCA does expect firms to provide effective support to their customers in a way that meets their needs.[13]
Channels of support
The FCA does not prescribe which channels of support firms must offer. However, firms must ensure that the channels of support they do offer meet the needs of their customers, including customers dealing with non‑standard issues, and customers with characteristics of vulnerability.[14]
Limited channels of support
It is acceptable for a product or service to have a limited channel of support (such as digital-only aimed at a specific tech-savvy target market). However, in these circumstances, the firm must:
- ensure that the product or service has been targeted correctly,
- ensure that communication of the target market is clear to potential customers,
- clearly communicate the support available,
- ensure that support works effectively,
- consider how to deal with non-standard issues,
- take appropriate steps to ensure operational resilience,
- take customers with protected characteristics into account, and
- take account of customers with changing needs.[15]
Meeting the support needs of vulnerable customers
The FCA expects firms to respond flexibly to the needs of customers with characteristics of vulnerability. The assumption is that firms will usually need to be able to provide support to their customers through different channels or by adapting their usual approach.[16]
Dealing with representatives
Where a natural person is authorised by a retail customer or by law to assist in the conduct of the retail customer’s affairs (such as a power of attorney), the firm must provide the same level of support to that person that they would have provided to the retail customer.[17]
However, this does NOT mean that firms must treat a representative as having the same characteristics of vulnerability (if any) as the customer they are representing. Rather, representatives should receive an appropriate standard of support and not face unreasonable barriers when acting on behalf of the customer. Of course, if a representative exhibits characteristics of vulnerability, firms are expected to respond flexibly, and provide effective support.[18]
Dealing with requests from other firms
The consumer support outcome does not apply to scenarios where a regulated firm is dealing with another firm on behalf of a customer (for example, where a mortgage intermediary is dealing with a lender). This would constitute a normal business relationship between a manufacturer and distributor.[19] However, firms must not cause harm to customers due to shortcomings in the way they deal with other firms. Firms must deal with reasonable requests from other firms in an effective way and in good time to enable other firms to comply with their obligations and provide effective support to customers.[20]
Outsourcing of customer support
Where firms are outsourcing or using a third‑party provider to provide customer support, they remain responsible and accountable for all the regulatory responsibilities applying to outsourcing and third‑party arrangements. Put simply, firms CANNOT delegate any part of their responsibilities in this area to a third party. As such, firms should have systems and controls in place to monitor that the support provided meets the standards set under the Consumer Duty.[21]
Monitoring the provision of support
Firms must be able to demonstrate that they have thought about how the design and delivery of their consumer support meets the requirements of the consumer support outcome.
Beyond this, firms should regularly monitor the actual support they provide, take relevant feedback into account, and look for signs that may indicate their channel offering is not sufficient to meet the needs of their customers. In practical terms, firms could use the following types of data to monitor that they are meeting expectations under the customer support outcome and ensuring that customers are not encountering unreasonable barriers:
- comparison of the level of support enjoyed by existing customers compared to prospective customers,
- analysis of customers’ use of products and services,
- root-cause analysis of complaints,
- customer persistency or retention information,
- abandoned claim rates, unusually low volumes of claims or declined/successful claims analysis,
- first contact resolution rates and average time to resolution,
- speed to answer the telephone and average wait times, call abandon rates,
- email and digital channel speed to answer,
- internal quality assurance,
- customer call listening exercises,
- satisfaction surveys, and
- net promoter scores.[22]
Remediation of failures in the provision of customer support
The FCA recognises that, on occasion, individual customers will have a poor consumer support experience. Where this occurs, it expects firms to act in good faith and deal with the issue promptly and fairly, take reasonable steps to address any shortfall in the support it provides, and provide redress where appropriate.[23]
Key questions for firms
Below are a set of questions which the FCA recommends firms consider in terms of managing their compliance with the customer support outcome:
- How has the firm satisfied itself that its customer support is effective at meeting customer needs regardless of the channel used? Does the firm test outcomes across different channels?
- What assessment has the firm made about whether its customer support is meeting the needs of customers with characteristics of vulnerability? What data, MI and customer feedback is being used to support this assessment?
- How has the firm satisfied itself that it is at least as easy to switch or leave its products and services as it is to buy them in the first place?
- How has the firm satisfied itself that the quality of any post-sale support is as good as the pre-sale support?
- What data, MI and feedback is the firm using to monitor the impact its consumer support is having on customer outcomes? How often is this data monitored, and what action is being taken as a result?
- How effective is the firm’s monitoring and oversight of outsourced or third-party service providers, and is it confident that these services meet the consumer support standards?[24]
Next time
Next time, we’ll be turning our attention to look at compliance with the Consumer Duty within the “Product Review” stage, so stay tuned!
[1] FG22/5, 9.2; Policy Statement PS22/9, 9.1
[2] FG22/5, 9.1
[3] FG22/5, 9.5
[4] FG22/5, 9.26
[5] PRIN 2A.6.1R
[6] PRIN 2A.6.2R
[7] FG22/5, 9.3
[8] FG22/5, 9.21
[9] FG22/5, 9.25; FG22/5, 9.19; FG22/5, 9.22
[10] FG22/5, 9.28
[11] FG22/5, 9.28
[12] FG22/5, 9.29
[13] Policy Statement PS22/9, 9.7; FG22/5, 9.16
[14] Policy Statement PS22/9, 9.7; FG22/5, 9.11
[15] FG22/5, 9.18; Policy Statement PS22/9, 9.7
[16] FG22/5, 9.14
[17] PRIN 2A.6.5R
[18] FG22/5, 9.37
[19] FG22/5, 9.38
[20] FG22/5, 9.39; PRIN 2A.6.6R
[21] Policy Statement PS22/9, 9.9; FG22/5, 9.40; FG22/5, 9.49
[22] FG22/5, 9.53; FG22/5, 9.45; FG22/5, 9.46
[23] FG22/5, 9.52; Policy Statement PS22/9, 9.7; FG22/5, 9.12
[24] FG22/5, 9.54
