For financial institutions, the economic problems of recent years have not yet disappeared.
As interest rates remain low, consumers are not incentivised to invest, so markets remain challenging for financial services firms. And with some consumers still struggling to maintain commitments made before the crisis, firms continue to tackle the issue of ongoing debts.
In this still-difficult environment, the Financial Conduct Authority (FCA) remains committed to ensuring a fair deal for consumers.
The Treating Customers Fairly (TCF) initiative is a key focus of its ongoing approach. On its website, the FCA says that ‘Treating customers fairly (TCF) remains central to our expectations of firms’ conduct, that firms put the well-being of customers at the heart of how they run their businesses.’
- Operational impact of TCF
For firms, Treating Customers Fairly has obvious operational implications: making sure products are fit for purpose and deliver what they promise is key to ensuring fair treatment. Giving consumers adequate information and products that do what they say they will, with sufficient support and redress where needed, are areas where firms need to deliver operationally in order to meet the FCA’s expectations.
- How TCF affects financial promotions
In financial promotions terms, too, TCF has implications. Fair treatment of customers encompasses the pre-sale communications that customers are exposed to. The FCA has six outcomes they expect TCF to achieve, three of which are relevant to financial promotions:
Outcome 2 – Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly
Outcome 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
Outcome 5 – Consumers are provided with products that perform as firms have led them to expect
This puts financial promotions firmly in the scope of TCF. The FCA makes this clear; one of the examples they give of a way in which a firm might fail to treat customers fairly is through ‘Failure to resolve issues concerning firms’ promotional material and using unfair terms in customer contracts (which result in material levels of consumer detriment)’.
Marketing and compliance teams in regulated businesses therefore need to be alive to the requirements of TCF. Along with the FCA’s other requirement that financial promotions are ‘fair, clear and not misleading’, TCF should inform the way you approach your marketing materials.
Wording should be clear and appropriate for the audience; the terms you use, particularly if ‘jargon’ or technical terms, will need to be different for the general public than they would be for a professional reader. Your claims should be realistic, and you should be able to substantiate any statements you make.
- Retaining evidence of TCF principles
Ensuring that you follow the correct process for compliance approval is critical, as your compliance team will be able to work with you to ensure your promotions meet the requirements. You will also need an audit trail that evidences the review and sign off process, so that in the event of any questions, you can show that your promotions have followed the required procedure.
It is vital to make sure that any compliance feedback is picked up and included in your completed financial promotion – you can’t afford for version control problems, or the failure to pick up on compliance changes, to impact your finished promotion. Keeping track of and implementing suggested changes in an organised way during the approvals process is essential.
You need to be able to evidence that TCF principles have been complied with, not only in the end result but in the processes that achieved this end result. Management Information (MI) is a big focus and the FCA states very clearly that firms need to keep appropriate measures of the way that TCF is achieved, in terms of process as well as results.
For marketing and compliance teams, the approvals process for financial promotions should provide evidence that review and sign off have been carried out by an appropriately qualified person. It’s therefore important that the way you capture and document this information meets FCA standards.
- How does TCF impact social media
The FCA’s guidance on social media make social media compliance particularly relevant, as this is an area firms might not have focused on previously. The new rules state that Twitter and other social media posts need to be archived in the same way as any other promotions, and that storing them on Twitter alone is not sufficient. You need to ensure that financial promotions via all the channels you use comply with TCF and the FCA’s other guidelines.
It’s clear from even this brief look at the requirements of TCF that they have huge implications for the production of financial promotions, as well as for firms’ operations. We would strongly urge anyone involved in marketing or compliance for a regulated business, to find out more.