Industry reacts to FCA’s new consumer duty rules

The new rules are based around four good outcomes for customers: products and services, price and value, consumer understanding and customer support. 

“As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met,” the FCA stated.  

The regulator also said the rules require firms to think of the “needs, characteristics and objectives of their customers — including those with characteristics of vulnerability — and how they behave,” throughout the whole customer journey.

The consumer duty means firms will have to:

• end rip-off charges and fees
• make it as simple to change or cancel products as it was to take them out in the first place
• give helpful and easy-to-find customer support, so people don’t give up while waiting for long periods to get an answer
• provide timely and clear time-saving information about products and services — rather than placing important information in lengthy terms and conditions — so consumers can make good financial decisions 
• provide products and services that are suitable for their customers
• focus on the real and differing needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction

The watchdog is now giving firms one year to implement the rules for all new and existing products and services that are currently on sale. 

This will be extended to closed-book products 12 months later to give businesses extra time to bring these older products that aren’t on sale any longer up to the new standards.

Understanding the regulator’s expectations, and firms stressing on what their customers need, should lead to more flexibility for companies to compete and get creative in the interests of consumers.

As businesses gauge how they’re meeting their customers’ needs, the FCA — which is aiming to become a more assertive and data-led regulator — will be able to swiftly spot practices that don’t benefit consumers and take action before these practices become standard.

Sheldon Mills, executive director of consumers and competition at the FCA, commented: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions.

“The consumer duty will lead to a major shift in financial services and will promote competition and growth based on high standards. 

“As the duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”

Reactions from the financial services industry  

Karl Dines, head of business consultancy at SimplyBiz, described the authority’s new rules as “a biggie”.  

Karl said that while most advisers have been treating their customers well, “the additional work lies in the creation of processes to meet, and document that you are meeting, the requirements of the new ‘consumer principle’, and its keen focus on demonstrable client support, understanding, and value.”
 
With a year to implement the rules, firms can achieve the conditions “but some hard graft will be required,” he said. 

Warren Vickers, managing director at Tenet Compliance Services, commented that the FCA’s new consumer duty rules were a momentous change for the financial advice sector.

“This should benefit all stakeholders in the long run and help advisers to demonstrate how they’re delivering good value and service for their clients.”

He said while this was “a new and high bar to clear for evidencing value” there’s the inescapable worry of change to go through before benefits were felt.

Warren added financial advisers needed to make sure they had all the resources in place to meet the loftier standards.

Commenting on the regulator’s announcement, Charlotte Mathieson, senior compliance officer at the NACFB, said: “With a 12-month implementation period now live, we are working hard to dissect the detail of the policy statement so we can understand how the FCA intends to assert their regulatory powers over firms to ensure the right outcomes for consumers are achieved and how these data-led assessments will vary from the existing Treating Customers Fairly framework.”

Debt charity StepChange welcomed the FCA’s confirmation and believes the new consumer duty will shape a beneficial cultural shift. 

Peter Tutton, head of policy, research and public affairs at StepChange, stated: “StepChange has always believed the consumer duty has the potential to be a game-changer, requiring firms to think beyond compliance box ticking and embedding a far richer focus on preventing harm and delivering good outcomes for consumers. 

"With the FCA now putting greater emphasis on embedding true accountability within firms and monitoring outcomes, financial services consumers will in future be better protected from harm, including the risk of reasonably foreseeable debt problems or product features that exploit them.

“In the meantime, it’s worth remembering that paying due regard to a customer’s circumstances has always been the regulator’s expectation of firms; the implementation period should be seen as an opportunity to bolster good practices and culture.”