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What is Consumer Responsibility?
The implementation of the Consumer Duty aims to set higher standards of consumer protection with a greater focus on the needs of the consumer.
The new rules do not change the nature of a firm/customer relationship or require a firm to carry out additional regulated activity (e.g., provide advice) where it would not have already done so. The regulator does not expect firms to go beyond their role and ability, to influence consumer outcomes. Firms should aim to help their customers understand the consequences of their decisions but, if a customer insists on a course of action that the firm regards as harmful, the firm is not obliged to prevent it. The FCA state “The Consumer Principle does not mean that individual customers will always get good outcomes or will always be protected from poor outcomes.”. Ultimately, the Consumer Duty does not remove the clients’ responsibility for their own choices and decisions.
However, “firms are responsible for enabling and empowering consumers to take responsibility for their actions and decisions”. Consumers can only do so when they are able to trust that the range of products and services they choose from are designed to function as expected.
Firms can establish this trust by ensuring that products and services:
- Continue to offer fair value
- Allow consumers to make informed decisions
- Have sufficient customer support in place
In addition to this, communications will need to be tailored to take into account the characteristics of the intended retail customers, including characteristics of those who may be considered vulnerable, such as low levels of financial capability, financial resilience, or confidence in managing their finances. This is to ensure that all consumers are equipped with all the necessary information they need, to make an informed decision. Any support provided must not create unreasonable barriers, such as charging excessive exit fees, to discourage consumers from leaving a product or service in pursuit of a better financial deal.
As a reminder, Firms have until 31st July 2023 to review products and services that are still on sale or available for renewal. If any issues are identified, these need to be addressed before the product or service can be sold to any new customers.
Products and services closed to new sales or renewals must also be reviewed before the end of the final phase of the implementation period – 31st July 2024 – and on an ongoing basis.
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.