Following two consultations on its proposals, the FCA has confirmed its plans for a new Consumer Duty which will require firms to put their customers’ needs first. The FCA has a parliamentary mandate, via the Financial Services Act 2021, to take this work forward.
The new rules comprise:
- a new Consumer Principle that ‘a firm must act to deliver good outcomes for retail customers’ – firms will need to understand and evidence whether those outcomes are being met;
- cross-cutting rules which provide greater clarity on the FCA’s expectations under the new Principle; and
- rules relating to four outcomes the FCA wants to see under the Consumer Duty – these relate to products and services, price and value, consumer understanding and consumer support.
The Duty will include requirements for firms to:
- end rip-off charges and fees;
- make it as easy to switch or cancel products as it was to take them out in the first place;
- provide helpful and accessible customer support, ie not making people wait so long for an answer that they give up;
- provide timely and clear information that people can understand about products and services so consumers can make good financial decisions, rather than burying key information in lengthy terms and conditions;
- provide products and services that are right for their customers; and
- focus on the real and diverse needs of their customers, including those with characteristics of vulnerability, at every stage of the customer journey and in each interaction.
The FCA hopes that this will lead to more flexibility for firms to compete and innovate in the interests of consumers.
The deadline for implementation has been extended so the rules are now being introduced on a phased basis:
- for new and existing products or services that are open to sale or renewal, the rules come into force on 31 July 2023; and
- for closed products and services, the rules take effect on 31 July 2024.
The FCA has also published final guidance to assist firms with implementation of the Duty.