The Duty proposes a major shift in the financial services sector as it will strengthen policies for consumer protection
The Financial Conduct Authority (FCA) has confirmed it will roll-out the Consumer Duty, requiring banks and other financial institutions to drastically improve their consumer protection efforts over the next 12 months.
The Duty, which has been moving through consultation stages for several months, proposes a major shift in the financial services sector as it will strengthen policies for consumer protection. The guidance focuses on improving four key aspects of financial service for customers: products and services, price and value, consumer understanding, and customer support.
The regulation requires financial institutions to detail policies in a clear, easily understood manner to facilitate financial decisions, end additional charges and fees, make is easier for customers to switch or cancel services, increase accessibility, and adapt in order to meet the interests of consumers.
Sheldon Mills, executive director of consumers and competition at the FCA, stated: The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first. 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.
The legislation underscores the regulator’s efforts to become more adaptable and assertive in protecting consumers. The Duty is part of the FCA’s three year plan to improve financial markets for retail consumers.
Jonathan Herbst, global head of financial services regulation at law firm Norton Rose Fulbright, commented: The Consumer Duty represents a step change for firms in how they are expected to treat retail customers. These proposals are part of the FCA’s broader push to ensure that firms are proactively doing the ‘right thing’ for customers.
He furthered that it will be important for firms to interpret the overarching Consumer Principle and the accompanying rules and guidance within this context.
Although it will take time to see the effect of these proposals on the market, it is clear at this stage that firms will need to undertake a thorough review of their current approach to retail customers. As many of these rules come into force in only a year, firms all across the market will quickly need to get to grips with these proposals in order to meet the FCA’s implementation deadline, explained Herbst.
Firms will have 12 months to bring their products up to the standards of the Duty, with an additional 12 months for closed-book products.