On 14th of May, the Financial Conduct Authority (FCA) set out plans for a new Consumer Duty, which will set a higher level of consumer protection in retail financial markets for firms to adhere to.
The consultation paper sets out how the FCA anticipate the Consumer Duty to provide stronger protection for consumers in financial markets.
The Consumer Duty would require firms to:
- ask themselves what outcomes consumers should be able to expect from their products and services
- act to enable rather than hinder these outcomes
- assess the effectiveness of their actions
The Consumer Duty will set clearer and higher standards for the FCA’s expectation of firms and firms’ culture. This would require all firms to focus on the actualised outcomes experienced by consumers, and to act in a way that reflects how consumers behave and transact in the real world. The FCA believe this will lead to consumers’ being better enabled to access and assess information.
The proposed Consumer Duty includes a package of measures, comprised of a new Consumer Principle that provides an overarching standard of conduct, supported by a set of Cross-cutting Rules and outcomes.
The FCA believe these proposed rules will better equip firms to put consumers at the heart of their businesses, offer products and services that are fit for purpose and represent fair value.
To enable firms and in particular their senior managers to to be clear about the changes in culture and behaviour that the FCA intend the Consumer Duty to bring about, the Regulator is proposing that the Consumer Duty would have 3 key elements:
- A Consumer Principle, which sets a clear tone and uses language that reflects the overall standards of behaviour we expect from firms.
- ‘Cross-cutting Rules’ which develop and clarify the Consumer Principle’s overarching expectations of firm conduct, and set out how it should apply in practice.
- ‘Four Outcomes’: a suite of rules and guidance that set more detailed expectations for firm conduct in relation to 4 specific outcomes for the key elements of the firm-customer relationship (i.e ‘communication’, ‘products and services’, ‘customer service’ and ‘price and value’).
The FCA expect firms to monitor, test and adapt their policies, practices and processes so they can satisfy themselves, and demonstrate that the outcomes for their customers are in line with expectations.
This consultation effects:
- regulated firms, including electronic money institutions, payment institutions and registered account information service providers
- consumer groups and individual consumers
- industry groups / trade bodies
- policy makers and regulatory bodies
- industry experts and commentators
- academics and think tanks
The FCA have asked that feedback on these proposals be submitted by 31 July 2021.