New Consumer Duty

Why the FCA are consulting on Consumer Duty

The FCA want to see a higher level of consumer protection in retail financial markets, where firms compete vigorously in the interests of consumers. They want to drive a healthy and successful financial services system in which firms can thrive and consumers can make informed choices about financial products and services.

The FCA see a range of good practice by firms in retail sectors with firms innovating to meet consumer needs. But they also see that firms are not consistently and sufficiently prioritising good consumer outcomes. This causes consumer harm and erodes consumer trust.

The FCA set out their high-level proposals in the first consultation; they’ve now revised those in light of feedback and are setting out proposals in more detail.

This consultation is likely to interest:

• regulated firms, including electronic money institutions, payment institutions and registered account information service providers
• consumer groups and individual consumers
• industry groups/ trade bodies
• policy makers and regulatory bodies
• industry experts and commentators , and
• academics and think tanks

Background to the new consumer duty

The new Consumer Duty aims to bring about a fairer, more consumer-focused and level playing field in which:

• firms are consistently placing consumers’ interests at the centre of their businesses and extending their focus beyond ensuring narrow compliance with specific rules, to focus on delivering good outcomes for consumers
• competition is effective in driving market-wide benefits, with firms competing to attract and retain customers based on high standards and innovate in pursuit of good consumer outcomes, and
• consumers get products and services which are fit for purpose, provide fair value, that they understand how to use and are supported in doing so

The first consultation outlined the high-level proposals to deliver this. It included:

• a new Consumer Principle that provides an overarching standard of conduct
• a set of crosscutting rules, and
• outcomes that support the Consumer Principle by setting expectations for firms’ cultures and behaviours

In the second consultation, the FCA set out more of the detail, including:

• key feedback to CP21/13 and FCA analysis of the responses received
• revised proposals for a new Consumer Duty, which include proposed draft Handbook rules and guidance, and
• cost benefit analysis

Click the link to read the new Consultation Paper: https://www.fca.org.uk/publications/consultation-papers/cp21-36-new-consumer-duty-feedback-cp21-13-further-consultation