The Financial Conduct Authority (FCA) has confirmed its plans to
bring in a new Consumer Duty, which will fundamentally improve
how firms serve consumers. It will set higher and clearer
standards of consumer protection across financial services and
require firms to put their customers’ needs first.
The Duty is made up of an overarching principle and new rules
firms will have to follow. It will mean that consumers should
receive communications they can understand, products and services
that meet their needs and offer fair value, and they get the
customer support they need, when they need it.
Clarity on the FCA's expectations and firms focusing on what
their customers need should lead to more flexibility for firms to
compete and innovate in the interests of consumers.
The Duty forms part of the FCA's transformation to becoming a
more assertive and data-led regulator. With firms assessing how
they’re meeting their customers’ needs, the FCA will be able to
quickly identify practices that don’t deliver the right outcomes
for consumers and take action before practices become entrenched
as market norms.
Sheldon Mills, Executive Director of Consumers and Competition,
said:
“The current economic climate means it’s more important than ever
that consumers are able to make good financial decisions. The
financial services industry needs to give people the support and
information they need and put their customers first.
“The Consumer Duty will lead to a major shift in financial
services and will promote competition and growth based on high
standards. As the Duty raises the bar for the firms we regulate,
it will prevent some harm from happening and will make it easier
for us to act quickly and assertively when we spot new problems.”
The Duty will include requirements for firms to:
- end rip-off charges and fees
- make it as easy to switch or cancel products as it was to
take them out in the first place
- provide helpful and accessible customer support, not making
people wait so long for an answer that they give up
- provide timely and clear information that people can
understand about products and services so consumers can make good
financial decisions, rather than burying key information in
lengthy terms and conditions that few have the time to read
- provide products and services that are right for their
customers
- focus on the real and diverse needs of their customers,
including those in vulnerable circumstances, at every stage and
in each interaction
The FCA is giving firms 12 months to implement the new rules for
all new and existing products and services that are currently on
sale. The rules will be extended to closed book products 12
months later, to give firms more time to bring these older
products, that are no longer on sale, up to the new standards.
Notes to editors
- The policy statement and guidance will be published on the
FCA website on Wednesday 27 July at 7am.
- The duty includes a new Consumer Principle that ‘a
firm must act to deliver good outcomes for retail customers’.
- By setting higher standards for firms, the Duty is central to
the FCA’s transformation to become a more innovative, assertive
and adaptive regulator and is a key part of the FCA’s new
three-year strategy to improve
outcomes for consumers and in markets throughout the UK.
- The FCA has also published final guidance to provide firms
with the information they need to implement the Duty.
- The FCA has a parliamentary mandate, through the Financial
Services Act 2021, to take this work forward.
- Link to consultation announcement (Dec 2021): https://www.fca.org.uk/news/press-releases/fca-introduce-new-consumer-duty-drive-fundamental-shift-industry-mindset
