The FCA has set out plans for a new Consumer Duty which will set clearer and higher expectations for firms’ standards of care towards consumers. It is hoped that the proposals will drive a shift in culture and behaviour for firms, meaning that consumers always get products and services that are fit for purpose, that represent fair value and are clearly communicated and understandable. Firms will face regulatory action, including enforcement investigations, if they fail to follow the Consumer Duty.
The proposals have 3 key elements:
- The Consumer Principle, which will reflect the overall standards of behaviour the FCA expects from firms. The wording being consulted on is: ‘a firm must act in the best interests of retail clients’ or ‘a firm must act to deliver good outcomes for retail clients’.
- Cross-cutting rules which would require 3 key behaviours from firms, which include taking 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.
- 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 closes on 31 July 2021.