The Financial Conduct Authority (FCA) has said it’s incoming Consumer Duty does not mean firms will be paying more in redress to customers when things go wrong.
However, the regulator added the duty does go further than current requirements by requiring firms to consider it and through attempting to prevent foreseeable harm.
FCA Consumer Duty team manager Richard Wilson made the statement in response to a question posed on the regulator’s webinar about whether the new regime would mean more in redress payments.
“No, we don’t expect the Consumer Duty to result in firms having to pay more redress, or redress more often to consumers,” he said.
“The whole emphasis of the duty is the opposite, it’s about preventing harm and getting firms to think ahead, reduce the likelihood of foreseeable harm occurring, and therefore reduce the likelihood they will need to put things rights and therefore hopefully improve outcomes and improve trust in the industry.
“Of course, that goes down to how well the firm implements the Consumer Duty and how much it embraces the need to tackle foreseeable harm and improve outcomes.”
‘Beyond current requirement’
Wilson noted that not being a perfect world the Consumer Duty was not a “zero-failure regime” and highlighted that even once the duty has been put in place things will still go wrong.
“So redress will remain a crucial element of our protection regime obviously. So when firms cause harm they should make it right,” Wilson added.
But the regime does put greater emphasis on considering the need for customer redress by firms.
“This is another area where our Consumer Duty does increase expectations of firms and as part of the Consumer Duty, firms are expected to take action to prevent foreseeable harm and be on the front foot on that,” Wilson continued.
“Where foreseeable harm is caused, we do say firms should take action to prevent that harm happening again in the future for other consumers, and where consumers have been impacted, redress maybe one of the appropriate actions to take.
“So it’s going beyond our current requirement which is not just where you’ve got complaints but to also more proactively consider it as part of the duty and part of acting on foreseeable harm.”