Consumer Duty – The Cross-Cutting Rules

The FCA’s Consumer Duty includes three cross-cutting rules which work with the other elements, namely the new Consumer Principle (Principle 12) and four outcomes, to set higher standards of consumer protection and ensure firms put their customers’ needs first.

The cross-cutting rules require firms to:

• act in good faith towards retail customers
• avoid causing foreseeable harm to retail customers
• enable and support retail customers to pursue their financial objectives

What is their relationship with Principle 12?

Principle 12 requires firms to “act to deliver good outcomes for retail customers”.

The cross-cutting rules set standards under the new Principle and outline how firms are expected to deliver good outcomes. In line with the rest of the Duty, the three rules apply both at a wider target market level and for the individual customer, depending on the circumstances.

The cross-cutting rules work closely in conjunction with one another, and firms are likely to find that neglecting one rule will mean they are in breach of others.

For instance, acting in good faith is key to avoiding causing foreseeable harm AND building an environment which enables customers to pursue their financial objectives. Acting in bad faith, for example, by knowingly selling a product which does not meet the customer’s needs or failing to fully explain the details of a product or service, could result in foreseeable harm and would not allow the customer to act in their own best interests and pursue their financial objectives.

What is their relationship with the four outcomes?

The Consumer Duty four outcomes are:

1. Products and Services
2. Price and Value
3. Consumer Understanding
4. Consumer Support

The cross-cutting rules help firms to better interpret the outcomes’ requirements. For example:

• Firms must act in good faith in their customer communications and interactions, to comply with the Consumer Support
• Ensuring Products and Services do not cause foreseeable harm is an effective step in establishing fair value.
• Providing effective support and targeted communications that contain all necessary information, will increase consumer understanding, and better enable customers to pursue their financial objectives.

However, the FCA also states “Compliance with the four outcomes would not be exhaustive of what the Principle or cross-cutting rules require”. Therefore, firms must use the cross-cutting rules as overarching standards which guide them in areas not specifically outlined by the four outcomes.

RWA has launched a Consumer Duty gap analysis to help firms implement the new rules and guidance. If you would like more information about this or require any assistance in relation to the new Consumer Duty, please contact your RWA Business Manager or get in touch via email at helpdesk@rwagroup.co.uk or call 01604 709509.