What is the Consumer Principle?

Setting higher standards and putting consumer needs first has been central to the FCA’s strategy to drive a healthy and successful financial services system. Under the new Consumer Duty, the FCA has expressed its desire for a higher level of consumer protection in retail financial markets.

In its Policy Statement PS22/9, the Regulator introduced new rules including a Consumer Principle (Principle 12) that states: ‘a firm must act to deliver good outcomes for retail clients’. This reflects the overall standards of behaviour the FCA expects from firms and is further developed by the other elements of the Consumer Duty.

As consumers face increasing financial pressures relating to the rising cost of living, it has been highlighted that better protection for consumers is needed, however some firms have fallen short of the FCA’s expectations. Where previous guidance explains how firms can comply with treating customers fairly under Principles 6 & 7, the new Consumer Principle (Principle 12) sets a higher and more exacting standard of conduct than outlined in these existing principles. Therefore, it has been noted that compliance with principles 6 & 7, does not guarantee that firms will not be in breach of Principle 12.

The stronger emphasis on “good outcomes” in the new Duty, requires firms to think more about their customer’s needs. Firms should be continuously analysing their processes and questioning whether customers have the information and support they need to pursue their financial objectives. They should ensure that information is clear enough to be easily understood and not misleading, to allow consumers to be able to make timely and informed decisions. Through consistently challenging themselves, firms should be able to identify where good outcomes are not being achieved and address factors that lead to these poor outcomes.

For firms unsure of how to meet these new expectations, the Regulator has suggested two key questions they should ask themselves: “Am I treating my customers as I would expect to be treated in their circumstances?” and “Are my customers getting the outcomes from my products and services that they would expect?”.

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.

About the author

Kirk joined RWA in 2015, having worked in the financial services sector for many years. He started out in both the general insurance and mortgage advice arms of HSBC, before becoming the Compliance Officer at Go Compare and Training & Competence Manager at Optimum Credit. 

At RWA, Kirk is Deputy Head of Compliance. He supports RWA clients by looking after their compliance, training and competence needs and keeping them up to date with regulatory changes. He promotes the achievement of fair customer outcomes and specialises in designing and implementing T&C schemes for firms of all sizes.

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