New Consumer Duty comes into force
Posted on in Business News
In what the Financial Conduct Authority has described as “a step change in standards of consumer protection” new Consumer Duty regulations have come into force for all products and services that are open to sale or renewal.
The new rules comprise:
- A new Consumer Principle that requires firms to act to deliver good outcomes for retail customers.
- Cross-cutting rules providing greater clarity on our expectations under the new Principle and helping firms interpret the four outcomes (see below).
- Rules relating to the four outcomes we want to see under the Consumer Duty. These represent key elements of the firm-consumer relationship which are instrumental in helping to drive good outcomes for customers.
These outcomes relate to:
- products and services
- price and value
- consumer understanding
- consumer support
The rules require firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey. As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.
The Duty is the FCA’s most far-reaching intervention in consumer protection for decades and is a cornerstone of a three-year strategy. The FCA says it means consumers should receive the support they need, when they need it, communications they understand, and products and services that meet their needs and offer fair value. And firms will need to make sure, and be able to show us, that they are acting to deliver good customer outcomes and protecting consumers from harm.
The Authority has said that it recognised this had taken significant effort and a shift in culture, though it believed that, in addition to delivering higher standards and reducing consumer harm, it expected it to increase trust and confidence, boost competition and innovation, and will mean firms face fewer rule changes in the future.