Authority says move will "lead to a major shift in financial services"
The Financial Conduct Authority (FCA) has confirmed its plans to bring in a new Consumer Duty, which it believes will fundamentally improve how firms serve consumers.
The FCA said the duty, which is made up of an overarching principle and new rules firms will have to follow, will set higher and clearer standards of consumer protection across financial services, and require firms to put their customers’ needs first.
It will mean that consumers should receive communications they can understand, as well as products and services that meet their needs and offer fair value, according to the regulator.
The regulator 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.
According to the FCA, the duty forms part of its transformation to becoming a more assertive and data-led regulator. With firms assessing how they are 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.
“The current economic climate means it’s more important than ever that consumers are able to make good financial decisions,” Sheldon Mills, executive director of consumers and competition at the FCA, said. “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; and provide helpful and accessible customer support, not making people wait so long for an answer that they give up.
It will also require them to 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; and focus on the real and diverse needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction.