What does it take to be a Consumer Duty champion?

3 min read

Heather Broadbent, Associate

On 25 January 2023, with six months to go before the Consumer Duty comes into force, the FCA published its review of firms’ implementation plans to embed the Duty. As part of its review, the FCA appraised firms’ progress as regards the appointment of a Consumer Duty champion, being an individual sitting on a firm’s board (or equivalent governing body) who is expected to ensure that the Consumer Duty is being regularly discussed in a meaningful way. While the FCA noted that most of the firms which it reviewed have appointed a champion at an appropriate level to discharge this duty, and indeed praised one firm with a large group structure for having appointed two champions to reflect the diversity of its regulated entities, the FCA had some limited criticisms of other firms’ appointments (or lack thereof) to date. The FCA disapproved of one firm that was proposing a champion who did not appear sufficiently senior to invoke confidence that they would be able to effectively challenge the firm’s implementation approach. The regulator also took a dim view of a small number of firms which proposed that the champion role be shared across the entire board or executive, given that such a division is likely to dilute the role.

So, taking heed of these examples, what are the FCA’s expectations in relation to the Consumer Duty champion? Such expectations are set out in its finalised guidance (July 2022), which supplements its final rules (July 2022), as well as its advice entitled ‘Consumer Duty – information for firms’ (October 2022). The FCA makes clear that the primary role of the champion is to support the Chair and CEO in raising the Consumer Duty regularly in all relevant discussions, as well as challenging the firm’s governing body/management on how it is embedding the Duty and focusing on consumer outcomes. The FCA has emphasised that that the champion role is not a prescribed responsibility under the Senior Managers & Certification Regime and that, crucially, it is the relevant board and senior management that has overall collective responsibility for the Consumer Duty, irrespective of the designation of the champion.

While noting the FCA’s assertion that it has intentionally not been prescriptive about the champion role, as it wants firms to approach the appointment in a way that is effective for their business, the FCA’s guidance provides some pointers as to whom it will consider suitable. The champion:

  • should be at board or equivalent governing body level;
  • should be at an appropriate board level in larger organisations to ensure that the Consumer Duty is discussed in a meaningful way;
  • where possible, should be an independent non-executive director; and
  • may be the Chair of the board, however this is likely most applicable to small companies where there is a need for considerable overlap of responsibilities from a resourcing perspective.

Looking ahead to how the champion may discharge their duties once the Consumer Duty is in force (although it would seem prudent to make a start on the following even before ‘Day One’), the champion will likely want to ensure that the Consumer Duty is a standing agenda item at all key governance forums. To this end, boards (or equivalent management bodies) may wish to consider holding longer or more frequent meetings to ensure that strategic decisions which impact customer outcomes are being thoroughly challenged and debated. Helpfully, the FCA provides examples of key questions which it expects the champion to use to guide board/management discussions of the Consumer Duty, which can be found throughout its finalised guidance. The FCA has stated that firms can also expect to be asked such questions in their interactions with the regulator. Finally, by the champion asking board members and senior managers to provide regular written confirmation that they are focusing on customer outcomes and meeting the regulatory requirements as regards the Consumer Duty, the champion may get further comfort that they are effectively discharging their duty. Any appointee to the champion role will need their voice to carry weight within the firm to be able to secure such confirmations and to shape meeting agendas. Accordingly, a powerful voice may serve the champion role more effectively than would a shrinking one.