The Financial Conduct Authority (FCA) has launched a consultation to introduce a duty to create a higher level of consumer protection in retail financial markets for firms to adhere to.
Firms are already bound by FCA rules to treat customers fairly, but the UK regulator is proposing to expand its existing principles.
The consumer duty, which firms will have to follow or face regulatory action including enforcement investigations if they fail to do so, will have three key elements:
- The consumer principle, which will reflect the overall standards of behaviour the FCA expects from firms;
- Cross-cutting rules which would require three key behaviours from firms, including 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; and,
- A suite of rules and guidance that set more detailed expectations for firms’ conduct in relation to four specific outcomes – communications, products and services, customer service and price and value.
The UK watchdog has issued a consultation and it is open for comment until 31 July 2021.
The FCA expects to consult again on proposed rule changes by the end of 2021 and introduce the rules by the end of July 2022.
It is also consulting on the “potential benefits of attaching a private right of action to the new duty, and what any unintended consequences of this might be”.
The regulator said: “The new duty 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.
“This will help, rather than hinder, consumers to make good choices and be confident that they will receive good customer service.”
‘Build positive futures’
Sheldon Mills, executive director of consumers and competition at the FCA, added: ‘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.
“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 wellbeing and build positive futures for themselves and their families.”