Treating Customers Fairly regulation demands customer-centric approach to business, with heavy punitive measures likely for non-compliance
14 March 2017 – Management consulting firm Consulta, in partnership with DàIL Consulting, have introduced a Fair Customer Conduct Blueprint (FCCB) to enable financial services providers (FSPs) to prepare for the pending implementation of the Treating Customers Fairly (TCF) regulatory framework.
The FCCB is a toolkit that has been designed to assist FSPs in incorporating the TCF requirements into an integrative framework that will ensure holistic customer, business, and regulatory outcomes. The FCCB will enable FSPs to assess and evaluate their current progress towards customer centric transformation - which is essentially the intended outcome of TCF.
“TCF demands more than mere compliance, it requires FSPs to consider every aspect of their business so they can adopt an enterprise-wide, customer-centric approach to business,” says Adré Schreuder, CEO of Consulta.
“We have designed the Fair Customer Conduct Blueprint to help FSPs avoid non-compliance sanctioning after the regulations come into effect. Ultimately, the Blueprint supports FSPs developing a culture centred on ‘customer fairness’ so they grow in a sustainable way by better serving consumers. Current practises of self-assessment mainly focus on compliance, whereas FCCB focusses on the readiness of staff and management to embrace the underlying principles of TCF as a way of doing business.”
TCF is likely to impose substantial punitive measures on non-complying FSPs in the form of stiff financial penalties and licence sanctions - measures that could result in reputational damage and other consequences detrimental to business.
Schreuder explains that the cost of regulatory non-compliance in countries where the TCF framework has been adopted has increased substantially in recent years. This is likely to continue, with similar expectations for the local market.
“The reputational damage of being exposed as an FSP that treats its customers unfairly would far outweigh any financial penalties,” he says.
“TCF will require FSPs to provide a portfolio of evidence showing that the fair treatment of customers has been considered, measured and tracked. It must also show that ongoing enhancements, underpinned by customer insights, are continuously implemented throughout the business, at all stages of the product and service life cycle,” says Ineke Prinsloo, Director at DàIL Consulting.
She recommends that financial services entities adopt a customer-centric toolkit, aligned to the principle-based regulations, rather than defaulting to an internally focused approach weighted to compliance when preparing for the implementation of the framework.
“TCF requires a cohesive customer philosophy underpinned by a regulatory framework-aligned diagnostic and plan to execute - like that offered by the Blueprint,” she says.
“With a customer-centric approach to business and the right tools to guide implementation of the TCF framework, FSPs will be able to bring together regulatory- and company strategies in a manner that goes beyond measuring compliance.”
Expected to come into effect on 1 May 2017, TCF is a set of outcomes-based principles intended to improve market conduct in financial services. It forms part of the Financial Sector Regulation Bill, which gives effect to the new “Twin Peaks” model of regulation aimed at achieving a stable financial system and increase consumer confidence in the financial services sector.