The Financial Conduct Authority (FCA) has shed further light on its new consumer duty which will ensure firms support and empower customers to make good financial decisions and avoid foreseeable harm at every stage of their relationship with customers.
The regulator said the rules will “ensure a higher and more consistent standard of consumer protection for users of financial services and help to stop harm before it happens”.
In setting out more detailed proposals in its CP21/36 consultation paper, the FCA revealed the new rules will require firms to focus on supporting and empowering customers to make good financial decisions and avoid foreseeable harm at every stage of the customer relationship.
They must also provide consumers with information they can understand, offer products and service that are fit for purpose and provide helpful customer service.
The new consumer duty will cover the areas of governance of products and services, price and value, consumer understanding and consumer support.
The FCA added it will use “assertive supervision” and its new data led approach to intervene quickly when it identifies practices which do not deliver for consumers.
Alongside today’s consultation, the FCA has published draft guidance to enable firms to prepare before the introduction of the new duty.
In addition to TCF
In May, the FCA revealed plans to introduce a fresh consumer duty on advisers and intermediaries to ensure they operate in the customer’s best interests at all times.
At the time the FCA confirmed the rules would be in addition to the existing Treating Customers Fairly (TCF) approach and aim to “drive a shift in culture and behaviour” by firms putting themselves in the customers’ shoes.
The regulator added the rules will apply to all intermediaries and providers operating in retail financial markets and include SME customers where the FCA has jurisdiction over the transaction.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Making good financial decisions is vital to financial wellbeing and trust, but too often consumers are not given the information they need to make good decisions and are sold products or services that do not offer the benefits they might expect. We want to change that.
“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.
“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.”
The consultation is open until 15 February 2022 and the FCA expects to confirm any final rules by the end of July 2022.