The Financial Conduct Authority (FCA) has released a 55-page consultation paper on its proposed Consumer Duty, the goal of which is to set a higher level of consumer protection in retail financial markets for companies to adhere to.
“The package of measures we are proposing will enhance our existing rules and is designed to tackle the harms we see in financial services markets, and their causes, as well as put consumers in a stronger position to make good decisions,” said Sheldon Mills, the FCA’s executive director of consumers and competition.
“We want firms to be putting themselves in the shoes of consumers and asking, ‘Would I be happy to be treated in the way I treat my customers?’. We want consumers to be able to advance their financial well-being and build positive futures for themselves and their families.”
Three elements that make up the new Consumer Duty are a consumer principle, cross-cutting rules, and the so-called four outcomes. The consumer principle reflects the overall standards of behaviour that the regulator wants from firms.
The overarching cross-cutting rules, meanwhile, will mandate businesses to take all reasonable steps not only to avoid causing foreseeable harm but also to enable customers to pursue their financial objectives. Companies are also required to act in good faith.
As for the four outcomes, this element relates to the areas of communications, products and services, customer service, and price and value within the context of the firm-consumer relationship.
According to the FCA, the new duty is aimed at driving a shift in culture and behaviour for organisations. It will also expand the watchdog’s existing rules and principles to ensure the consistent delivery of a higher level of protection for consumers.
Comments from industry stakeholders are welcome until the end of July.
