FCA unveils plans to introduce new ‘consumer duty’

The FCA has announced new plans to ensure a more consistent standard of consumer protection for users of financial services and help to stop harm before it happens.

The regulator revealed it is concerned that financial services do not always work well for consumers, and suggested the new plans will “fundamentally shift the mindset” of firms.

Under the new rules, firms would be required to focus on supporting and empowering their customers to make good financial decisions and avoiding foreseeable harm at every stage of the customer relationship. Firms will have to provide consumers with information they can understand, offer products and service that are fit for purpose and provide helpful customer service.

The FCA indicated it will use “assertive supervision” and its new data led approach to intervene quickly when it identifies practices which do not deliver for consumers.

FCA executive director of consumers and competition, Sheldon Mills, said that making good financial decisions is “vital” to financial wellbeing and trust, but warned that too often consumers are not given the information they need to make good decisions.

“We’ve been working to set a higher standard for firms, to put more of the onus on them to act in their customers’ interests and get their products and services right,” Mills said.

“The new duty will drive a change in culture at firms. We expect firms to step up and put consumers at the heart of what they do and we’ll be holding senior managers accountable if they do not. The duty will also help create an environment for healthy competition between firms, encouraging them to be innovative in developing products and services that meet consumer's needs.”

Commenting on the plans, AJ Bell head of retirement policy, Tom Selby, added: “Nobody could argue with the intent of these proposals, which is to ensure good outcomes are at the heart of everything financial services firms do. This applies across all facets of the value chain, from product design to marketing and communications.

“While the FCA is right to focus on boosting standards across the market, there also needs to be a credible enforcement threat against the minority of firms who consistently fail savers and investors. The regulator says it plans to be more assertive in dealing with firms who do the wrong thing – this will be crucial in delivering improved outcomes for consumers.”

Alongside the FCA’s consultation, it has published draft guidance to help firms prepare before the introduction of the new duty.  The regulator’s consultation is open until 15 February 2022 and expects to confirm any final rules by the end of July 2022.

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