FCA Consulting on a New Consumer Duty

The FCA is consulting on a new Consumer Duty aimed at setting “clearer and higher expectations for firms’ standards of care towards consumers.”

The proposed Consumer Duty would require firms:

  • to ask themselves what outcomes consumers should be able to expect from their products and services;
  • to act to enable rather than hinder these outcomes; and
  • to assess the effectiveness of their actions.

The changes are being proposed in order to ensure that consumers get products and services which meet their needs and the outcomes that they would reasonably expect. While the FCA acknowledges that many firms are already delivering this for consumers and demonstrating good practices, they also encounter many firms which are not adequately considering the needs of their customers.

The consultation paper also highlights the needs of vulnerable customers, who are at greater risk of harm where firms are not taking sufficient care and consideration. This is in line with the regulator’s latest guidance on the fair treatment of vulnerable customers.

The proposed Consumer Duty would be set out in the FCA Handbook and, for clarity, would have three key elements, which are:

  • A Consumer Principle, setting a clear tone, and using language that reflects the standards of behaviour expected from firms.
  • ‘Cross-cutting Rules’ which develop and clarify the overarching expectations of firm conduct, and set out how it should apply in practice:
    • Firms must take all reasonable steps to avoid foreseeable harm to consumers;
    • Firms must take all reasonable steps to enable consumers to pursue their financial objectives; and
    • Firms must act in good faith.
  • ‘Four Outcomes’ which represent the key elements of the firm-customer relationship:
    • Communications
    • Products and Services
    • Customer Service
    • Price and Value

The FCA states that it wants “firms, and in particular their senior managers, to be clear about the changes in culture and behaviour that we [the FCA] intend the Consumer Duty to bring about.”

Feedback on these proposals is sought by 31 July 2021, when the consultation closes.

Feedback can be submitted via an online form, via email at cp21-13@fca.org.uk or in writing at: Consumer and Retail Policy, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.

The FCA aims to publish a second consultation by the end of the year, with the any new rules expected to be in place by 31 July 2022.

To read the consultation paper in full, go here.

RWA will continue to provide updates on these proposed changes as the consultation process continues. For further advice, please contact your RWA Business Manager.

About the author

Ash was Managing Director at RWA from 2018. He had over 15 years’ experience in the legal and compliance field and ten years in broker sales and leadership roles in national and global insurance firms. Sadly, Ash passed away suddenly in August 2021. 

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