The Financial Conduct Authority (FCA) has released a policy statement together with finalised guidance that aims to set higher and clearer standards of consumer protection across all financial services.
The new 'Consumer Duty' has been introduced to improve how firms in financial services serve consumers.
What is the Consumer Duty?
The Consumer Duty is made up of an overarching principle as well as a set of rules that financial firms must stick to, with the ultimate aim of putting customers' needs first.
The principle states 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'.
According to the FCA website, the rules under the Consumer Duty state that firms must:
- 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
Why has the Consumer Duty been introduced?
The Consumer Duty has been developed to improve the 'firm-consumer relationship'. The FCA has identified four key elements of the firm-consumer relationship which it believes are instrumental in helping to drive good outcomes for customers.
The key areas are:
- products and services
- price and value
- consumer understanding
- consumer support
The FCA has stated that as well as acting to deliver good customer outcomes, firms will also need to understand and evidence whether those outcomes are being met.
Is there a deadline for firms to implement the new rules?
The FCA has given firms 12 months to implement the rules on both new and existing products and services. Firms have an additional 12 months to implement the rules for old products and services that are no longer on sale.
Who is affected by the Consumer Duty?
The Consumer Duty will directly impact firms that operate in the financial services industry as well as the consumers they serve. It is likely to benefit consumers in a number of ways. Communication should be simpler, information should be easier to understand and consumers should be able to shop around with more confidence as well as easily cancel products and services when they are no longer needed.