THE CONSUMER DUTY: OUTCOME AND IMPACT OF THE GFSC REVIEW
Consumer Duty (or alternatively, the 'Duty') is a significant step forward in the evolution of financial services regulation, with its priorities focused on enhancing the protection, and fair treatment of consumers. Following its implementation by the Financial Conduct Authority in the United Kingdom firms regulated by the Gibraltar Financial Services Commission (the 'GFSC'), which are offering services to customers in the United Kingdom, are caught by this Duty. In support of this, the Gibraltar Government introduced the Financial Services (Core Principles and Consumer Duty) Regulations 2024, which requires the delivery of good outcomes for retail customers, in particular, by acting in good faith towards these customers, avoiding foreseeable harm to them; and enabling and supporting them to pursue their financial objectives.
Good outcomes are at the core of the Duty, but what does this mean to businesses? How does a business not only provide good outcomes, but substantiate this in practice? The GFSC have sought to clarify this, and, in March 2025, they released their Consumer Duty Board Report Thematic Review. The Review considered Consumer Duty Board Reports, and the accompanying minutes associated with a Board's approval of such Reports. The Review identified both good and poor practices across the varying Reports and minutes received, so setting out the GFSC's ongoing expectations of firms under their remit. Whilst a full comprehensive reading of the Review is advised, the following are key features present throughout.
The Review positively identified exemplary practices that align with the GFSC's expectations, serving to enhance consumer protection. The best Reports attested a firm's compliance with the Consumer Duty, identified good and poor consumer outcomes, focused on product governance and suggested actions that were properly considered and agreed by a Board within the minutes. Consumer outcomes were prioritised at Board level, such as by introducing dedicated consumer duty committees and conducting regular reporting on customer welfare. A clear timeline was established where firms evidenced their consumer duty, how they incorporated it in the first place, and where this was identified as being insufficient, how they intended to improve going forward, with the Board's actively providing critique and oversight.
Despite evidence of consumer duty compliance, the Review did highlight poor practices that may be used as an insight into the GFSC's expectations. The Review identified a lack of clarity and confirmation that the consumer duty had complied with the regulations. For example, the Reports were said to be vague and difficult to interpret or, contained little evidence and data, leading to a question on how Board's were assured of their compliance. An additional area of criticism was in relation to the failure to properly follow up on identified issues with a firm's compliance with the Duty. Therefore, despite there being clear indicators of harm, some firms failed to record any strategies for change, actions or discussions. Whilst there were many other areas of poor practices highlighted worthy of individual read, there is a clear expectation exemplified throughout the Review, one that shows that the GFSC do not expect perfection, but effort. Firms should proactively seek to improve compliance with their consumer duty, through internal governance, training, evidence of compliance through data, and proper product oversight to name but a few. Nevertheless, this is just the first step, it is expected that Board's be accountable, that they challenge, and object, should the Duty not have been obliged with. A Board must be confident that the Duty has been met, and if it hasn't, the firm must not only acknowledge this but propose steps to improve this. The endeavour should not be a tick-box exercise; indeed the minutes are an invaluable opportunity to provide insight into a Board's logic, intentions and objectives. A firm should take advantage of this.
The Review has clarified that whilst some GFSC regulated firms are leading the way by embedding consumer focused strategies into their operations, many others are falling significantly short due to superficial implementation and inadequate oversight and challenge. In order to enhance adherence to the regulatory requirements, GFSC regulated firms need to promote transparency within practice, make decisions based on data through pro-active monitoring and most of all, challenge and critique ways in which to improve the Duty year on year. It is clearly the GFSC's aim that over time the financial services industry will be able to work towards promoting a more ethical, open and consumer focused future beneficial to all. Until then, whilst firms navigate this new area, there could be a significant amount of trial and error.
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