The FCA has issued a further consultation paper on its proposed new Consumer Duty. The new consultation comprises feedback to CP21/13 and further consultation.
The aim of the Consumer Duty is to ensure a higher and more consistent standard of protection for consumers and to prevent harm before it occurs.
The new consultation contains draft guidance intended to help firms prepare for the Consumer Duty.
The proposed Consumer Duty contains three elements, which are:
- A Consumer Principle – “a firm must act to deliver good outcomes for retail clients” which reflects the overall standards of behaviour expected from firms and which is developed by the other elements of the Consumer Duty.
- Cross-cutting rules which develop the regulator’s overarching expectations that apply across all areas of firm conduct.
- Four outcomes which give more detailed expectations for the key elements of the firm-consumer relationship.
The four proposed outcomes are:
- Products and services: All products and services for retail customers should be fit for purpose. They should be designed to meet consumers’ needs and targeted at those consumers.
- Price and value: All consumers should receive fair value.
- Consumer understanding: Firm’s communications should support and enable consumers to make informed decisions about financial products and services. Consumers should be given the information they need, at the right time, and this should be presented in a way they can understand.
- Consumer support: Firms should provide a level of support that meets consumers’ needs throughout their relationship with the firm.
The FCA’s concern is that, currently, financial services do not always work well for consumers and it wants the new plans to shift the mindset of firms.
The FCA intends to use “assertive supervision” and a “data led approach” to intervene swiftly when practices which do not deliver for consumers are identified.
Executive Director of Consumers and Competition at the FCA, Sheldon Mills, said, “Making good financial decisions is vital to financial well-being and trust, but too often consumers are not given the information they need to make good decisions and are sold products or services that do not offer the benefits they might expect. We want to change that. We’ve been working to set a higher standard for firms, to put more of the onus on them to act in their customers’ interests and get their products and services right.”
“The new duty will drive a change in culture at firms. We expect firms to step up and put consumers at the heart of what they do and we’ll be holding senior managers accountable if they do not. The duty will also help create an environment for healthy competition between firms, encouraging them to be innovative in developing products and services that meet consumer's needs.”
Feedback on these proposals is sought by 15 February 2022, when the consultation closes.
Comments can be submitted via online response form, email at firstname.lastname@example.org or in writing to Consumer & Retail Policy, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.
Final rules are expected by the end of July 2022.
To read the consultation paper in full, go here.
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