FCA’s new consumer duty springs into force

The FCA aims to see a higher level of consumer protection in retail financial markets, where firms compete in consumers’ interests.

This means that under the new regulation, firms will need to assess and evidence the extent to which and how they are acting to deliver good outcomes.

This will enable the FCA to identify practices that negatively affect these outcomes and intervene.

A more outcome-focused approach will also give firms greater flexibility to adapt and innovate, as it can be applied more easily to technological change and market developments.

For new and existing products or services that are open to sale or renewal the rules come into force today, however for closed products or services, the rules come into force on 31st July 2024. 

Commenting on the introduction of the new regulation, Natalie McNamara, national sales manager at mortgage and savings technology provider Finova, commented: “Today marks the deadline for firms to comply with the new CD rules, with many intermediaries having already implemented a clear plan of action in advance, to meet the FCA’s new expectations.

"Those who are still in the process of, or are yet to start aligning their firm to these new rules, should be looking to review all elements of their business where they can, and continue to embed these new practices to facilitate better customer outcomes.”

Jonathan Sealey, CEO at Hope Capital, also said: “In our view, placing customer interests at the heart of activities is something all firms should prioritise. 

“The FCA won’t be interested in hearing what firms are saying they are doing to reflect the regulatory changes, but instead they will want to see tangible evidence of what is actually being done.”

Andrew Gething, MD at MorganAsh, added: “Complacency has long been a challenge for CD with firms believing they already meet its requirements.

“In reality the new rules expand the scope of vulnerabilities firms must now consider and the actions they must take, [while] also expanding the monitoring requirement considerably to cover the lifetime of the product. 

“Technology is proving essential in meeting [these] requirements, not just for a consistent and objective way to assess vulnerability, but to mitigate the considerable training overhead of learning all the necessary characteristics of vulnerability, and the myriad of treatments available to clients.

“While there may be firms still with work to do and attitudes still to change, those that have embraced CD are already understanding the competitive advantage it can provide.”