From CompliNEWS | Financial Service Intelligence Watch
Enhancing fair customer treatment in financial services: an introduction to COFI
Although the COFI Bill currently remains in its second draft, significant alterations to its stance on TCF are not anticipated, providing financial service providers (FSPs) with the opportunity to proactively gear up for the enactment of COFI.
At present, TCF principles are covered to varying extents across different regulations, with certain frameworks, such as the Policyholder Protection Rules (PPRs) for insurers, embedding more detailed requirements than others. This disparity leads to inconsistencies and varied interpretations of these principles across the sector.
According to Masthead COFI aims to remedy this situation. Despite recent advancements in customer outcomes, a consistent approach has been missing. COFI intends to establish TCF principles as a universally recognised set of requirements, ensuring fair outcomes that are consistently implemented and enforceable across all financial institutions.
Strengthening TCF Through COFI
How exactly will COFI enhance TCF in comparison to existing legislation? Here’s a detailed look:
- Detail-oriented Approach – COFI offers a detailed exploration of TCF Outcomes, addressing them within specific sections for a comprehensive breakdown. For example, TCF Outcome 1, which focuses on customer confidence in institutions prioritising TCF, is directly addressed in section 17 concerning culture and governance.
- Consolidated Legislation – Currently, the TCF Outcomes are scattered across various legislations, causing confusion amongst FSPs and customers alike. COFI aims to clarify this by providing a unified legislative framework that applies TCF principles uniformly across all financial institutions, regardless of their specific roles.
- Data-Driven Evidence – Under COFI, it’s not enough for financial institutions to claim compliance with TCF based on adherence to legislative requirements alone. They will need to evidence TCF through customer outcomes, with a significant emphasis placed on reporting conduct indicators in the Omni-Conduct of Business Returns (CBR).
Advantages of a Stronger TCF Framework Under COFI
The implementation of a more robust TCF framework under COFI presents clear benefits. For consumers, it means a genuine prioritisation of TCF, significantly enhancing their experience. For financial institutions, it offers operational cost savings and the flexibility to demonstrate positive client outcomes beyond mere compliance. Moreover, a detailed understanding of TCF principles and standards ensures uniform application across the sector, fostering consistency and transparency.
Preparing for COFI’s Arrival
While the precise date of COFI’s legal enactment remains uncertain, FSPs can begin preparations by ensuring their current operations are aligned with TCF principles. This includes enhancing data collection systems for Omni-CBR reporting and understanding how to translate this data into demonstrable evidence of commitment to TCF Outcomes.
By adopting a proactive approach, including customer feedback collection and staff training on market conduct indicators and TCF Outcomes, FSPs can facilitate a smoother transition to the new regulatory environment.
Planning Ahead for COFI Implementation
As the financial sector braces for the changes COFI will introduce, focusing on outcomes rather than strict adherence to rules, FSPs have the opportunity to adjust their operations to meet upcoming requirements. By viewing the enhanced TCF framework as an opportunity for improvement, FSPs can not only ensure compliance but also enhance their client satisfaction and retention, contributing to their success in a dynamic financial landscape.