FCA action plan on cash savings rates - mind the gap

This week, on Consumer Duty go-live day, the FCA set out a 14-point action plan to ensure banks and building societies are passing on interest rate rises to savers appropriately, that they’re communicating with customers much more effectively and offering them better savings rate deals. 

The regulator is looking to clampdown on financial service providers who are not offering fair value to consumers by offering low savings rates.  

The variance between firms is stark and wherever you sit on the savings rate spectrum you should take away 5 key points: 

1. Respond - If your savings rates are one of the lowest in the market, you need to justify by the end of August how those rates offer fair value based on Consumer Duty that now is in force.  

   This will be through a fair value assessment which most firms have completed as part of Consumer Duty Implementation. This is a strong reminder that these assessments should not gather dust on your compliance shelf but are tangible documents the regulator can request at any time.  

   We have supported several firms in preparing their fair value assessments and have provided assurance over these documents. If you find yourself on the FCA hit list and are unclear on what you need to do, reach out to our team for help. The FCA notes that if firms cannot justify how their rates offer fair value then “the FCA will take action.” And although this relates specifically it could open the door for the FCA to review your whole Consumer Duty implementation. 

2. Accelerate - It’s highly likely many firms still have work to do to accelerate their fair value assessments, particularly, now the focus will move to closed products. Firms will need to ramp up their fair value assessments for off-sale accounts ahead of the July 2024 Consumer Duty deadline for off-sale accounts. 

   Resourcing this work now is crucial. Firms should build this into their post implementation plans for Consumer Duty and make sure they understand the difference between on-sale and off-sale products. 

   From our work on Consumer Duty, we challenged firms to explain how significant differences in price offer fair value and consider further action if this gap does not continue to close. These types of decisions are what the regulator will want to see so make sure these are clearly evidenced in your governance processes.  

3. Monitor - Firms will need to closely monitor the effectiveness of customer communications, with larger firms required to provide the FCA with an evaluation by end 2023 and any follow up action they are taking. 

   Proactively monitoring the savings rates in your financial promotions and customer communications are key so that you can take swift action and mitigate any risk to consumers. This will include social media, affiliates and other third-party platforms used to promote saving rates.  

4. Action - Firms need to take action to prompt their customers in lower paying savings accounts or non-interest-bearing accounts to consider alternatives. Firms should consider their end-to-end customer journey and whether enhancements need to be made to nudge and prompt alternatives to consumers who are on lower rate savings accounts.  

5. Signpost - Firms should consider how they can further support customers to access free advice from MoneyHelper. MoneyHelper is a free service provided by the Money and Pensions Service. The Money and Pensions service is an arm’s-length body, sponsored by the Department for Work and Pensions. Firms should build this into the customer journey and improve the signposting of organisations such as this to improve consumer financial resilience.

Next Steps

The measures outlined by the FCA support their strategy to reduce and prevent serious harm, raise standards and promote competition. The FCA is continuing to monitor the market and will take further action if it doesn’t see significant progress by the end of 2023. 

How we can help

We have supported several firms in Consumer Duty implementation and understand the challenges clients face when completing granular fair value assessments. We are continuing to support clients in post implementation activities to close the gap in their Consumer Duty action plans. Our team are knowledgeable and experienced in retail consumer finance and are on hand to support you in demonstrating effectively that you have delivered the outcomes the FCA has set out. 

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