PIMFA
WHAT IS CONSUMER DUTY?
The Duty is intended to ensure a higher standard of care across financial services for retail customers and to deliver good consumer outcomes throughout the life cycle of products and services.
- Why is consumer duty important?
This is a significant regulatory change with a need for a shift in culture and mindset to focus on delivering good outcomes for retail customers. The Duty is subjective and requires a holistic approach: firms will need to consider application of the duty in line with the size and type of firm and the firm role within the distribution chain.
- Background
The Consumer Duty is fundamental to the Financial Conduct Authority’s (FCA) 2022 business plan and April 2022-25 strategy.
The objective of the Consumer Duty is to stop consumer harms and ensure a more consistent standard of consumer protection for financial services users. This aligns with FCA business priorities 2021 – 2022 focused on consumer outcomes.
There is parliamentary and political appetite to address consumer harms (for example, as defined in the consultation, finding it harder to switch or get a better deal), particularly given the increase in vulnerable consumers because of the pandemic (as shown by responses to the (FCA) Financial Lives Survey 2020).
- Aim
The aim of the duty is to create a higher level of consumer protection in retail financial services. There is an expectation of greater supervision driven by the FCA’s new data-led and outcomes-based approach. Currently firms are bound by FCA rules and Principles for business, which include treating customers fairly, and ensuring products and services information is clear, fair and not misleading (Principles 6 and 7).
- ELEMENTS OF DUTY
The purpose of the duty is to deliver better outcomes for consumers across the whole consumer journey and aims to set a higher standard of care and expectation than the existing set of principles and rules with a package of measures:
- Consumer Principle 12 stating a firm must act to deliver good outcomes for retail customers.
- Cross cutting rules stating that firms must:
- Act in good faith toward retail customers
- Avoid causing foreseeable harm to retail customers
- Enable and support retail customers to pursue their financial objectives
FCA update 22.02.23
Call of Duty: How putting customers front and centre will help industry innovate
The Financial Conduct Authority’s (FCA) Executive Director, Sheldon Mills (Consumers and Competition) delivered a speech on the consumer duty, recognising that the Consumer Duty (CD) is a significant undertaking.
The speech notes CD requirements to deliver good outcomes for customers in financial difficulty, offering fair value to retail customers & the responsibility to consider customers in vulnerable circumstances.
It sets out actions firms should prioritise to meet the July deadline such as focusing on the areas that will have the biggest impact on outcomes for customers, and also refers to the recent review of implementation plans, noting good examples as well as areas of concern. Next steps (including a small firm survey) are also outlined
