The closed book deadline is 31 July and covers books of business that are not open to new clients.
The ERC said that the duty will mean that “consumers on products that are no longer sold or renewed must come under the same scrutiny as those on current products”.
The trade body said it is “considered even tougher to implement” than the first phase of Consumer Duty, as closed books of mortgage can be decades old or sold on without a full client history.
Equity release is the subject of the duty, along with retail financial servies, and can be a lifeline to customers of other products, such as mortgage prisoners and interest-only customers without repayment vehicles, who could be identified under the duty.
The ERC has published guidance for its members, covering the whole equity release value chain, to assist members.
Advisers have a role to play
Kelly Melville-Kelly (pictured), ERC’s director of risk, policy and compliance, said while providers shoulder the most responsibility, advisers have a key role to play too.
She said that Consumer Duty was about “fairness” and firms must “act in the best interests of their customers and take reasonable care to avoid causing harm, at all times”.
“Embracing this proactive approach during the open book phase has meant that organisations have had to update and change their processes, but our members have risen to the challenge. Applying the same scrutiny to closed book customers is going to be harder still.
“Some firms will have inherited closed books [that] present an even greater challenge, as many of the originator firms are no longer in market. For providers, termed manufacturers in the duty, this could mean unpicking legacy systems that have long since been archived,” Melville-Kelly added.
She said that, for advisers or distributors, it’s about “working with the providers as well as checking client records to see if any are on closed book products and ensuring they are kept informed of their options.
“They also need to ensure that, if a client’s circumstances have changed, there is an assessment of the ongoing suitability of the product, with particular attention paid to vulnerable customers.
“Equity release can also provide support for other closed book customers who may be languishing on interest-only products without a repayment vehicle, or who find that they are mortgage prisoners after their original provider left the market,” Melville-Kelly added.
She said that even if a customer sits within a closed book, companies have to check whether the product remains suitable, and the customer still understands the risks and benefits. If the answer is no, then firms must have a plan to support that customer.
“The end of July is also the deadline for firms to submit their annual review, which must include an assessment of whether the firm is delivering good outcomes for its customers,” Melville-Kelly noted.
