The latest action from the Financial Conduct Authority (FCA) published today sets out plans for a new consumer duty to improve culture in retail financial markets whilst tackling consumer harm and help vulnerable clients.
The FCA’s latest update says firms are already following the FCA rules and principals in treating customers fairly and many firms delivering the right outcomes for consumers.
The FCA has also seen evidence of practices that causing consumer harm providing information which can mislead or be difficult for the consumer to understand.
This could be why 1 in 4 of that responded to the FCA’s 2020 Financial Lives Survey revealed their lack of confidence in the financial services industry.
Only 35% of respondents agreed that firms are honest and transparent in their dealing’s customers.
To enable consumers getting good outcomes from services the FCA are proposing to expand its existing rules to ensure firms provider better consumer protection.
To ensure consumers always get products and services fit to purpose the new duty will concentrate on culture and behaviour for firms.
Sheldon Mills FCA executive director of consumers and competition said “We are proposing a package of measures which will enhance our existing rules and will be designed to tackle the harms we see in the financial services market and what are the causes. As well as putting consumers in stronger positions to make a good decision on financial products”.
“We want firms to put themselves in the shoes of consumers and ask themselves “would I be happy to be treated in the way I treat my customers?”.
“We want consumers to advance their financial wellbeing and build a positive future for themselves and their families”.
The 3 key elements the consumer duty will have are:
A. The consumer principle, which will reflect the overall standards of behaviour the FCA expects from firms. The wording being consulted on is:
B. Cross-cutting rules which would require 3 key behaviours from firms, which include all reasonable steps to avoid foreseeable harm to customers, taking all reasonable steps to enable customers to pursue their financial objectives and to act in good faith.
C. It will also be underpinned by a suite of rules and guidance that set more detailed expectations for firm conduct in relation to 4 specific outcomes – communications, products and services, customer service and price and value.
The consultation is open for comments until 31st July 2021 and the FCA are expected to consult again on the proposed rule changes by the end of the year and make any new rules by the end of July 2022.
The FCA is also discussing attaching a private right of action to the new duty and what any unintended consequences of this might be.
We are looking forward to working within the new rules as we believe we are already working within those standards but we look forward to any additional guidance offered by the FCA to better improve our services.