Retrospective effect

The Consumer Duty DOES NOT have retrospective effect in the sense that it does not apply to past actions.[1]? Rather, from its implementation date, the Consumer Duty only applies on a forward-looking basis to existing products and services (including closed book products and services).

This means that, with respect to closed book products and services, firms will still be required to perform analysis regarding price and value outcomes and to review closed products and services against the cross-cutting rules.? However, they should do so within the context of the conditions that applied at the time the products were designed and sold.[2]? For example, when assessing fair value, lenders can take account of the costs of providing credit at the relevant time.[3]? If a firm identifies that a legacy product does not provide fair value, the FCA has confirmed that it will NOT be necessary to amend vested contractual rights to address the issue. Instead, firms would need to take appropriate action to avoid causing foreseeable harm and provide fair value (for example, by changing non-vested charges).[4]

Next time

Next time, we’ll be turning our attention to look at purchases of product books, so stay tuned!

[1] Policy Statement PS22/9, 1.36, FG22/5, 3.1

[2] Policy Statement PS22/9, 3.14

[3] Policy Statement PS22/9, 3.14

[4] Policy Statement PS22/9, 3.14