PIMFA
CONSUMER DUTY
The Consumer 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.
The Consumer Duty 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 Consumer Duty is subjective and requires a holistic approach: firms need to consider the application of the duty in line with their size, type and role within the distribution chain.
- Background and aim
The Consumer Duty was a fundamental component of the Financial Conduct Authority’s (FCA) 2022 business plan and their ongoing 2022-25 strategy. The Consumer Duty also aligned with the FCA business priorities 2021 – 2022 focused on consumer outcomes.
There is continued parliamentary and political appetite to address consumer harms (for example, as defined in the earlier consultations, where consumers find it difficult to switch or get a better deal), particularly given the increase in vulnerable consumers as a result of the Covid-19 pandemic (as shown by responses to the FCA Financial Lives Survey 2020).
The aim of Consumer 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 THE CONSUMER DUTY
- Consumer Principle 12 states that a firm must act to deliver good outcomes for retail customers.
- Cross-cutting rules state 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
- Products and services
- Price and value
- Consumer understanding
- Consumer support
This report is free for our members and is available to purchase for non members.
14 March 2024
Financial Conduct Authority Chief Executive’s Speech: Investing in outcomes: a regulatory approach to deliver for consumers, markets and competitiveness
In a speech on 14 March, Nikhil Rathi noted the Financial Conduct Authority (FCA) are keen to build a deeper, more open relationship with investors, analysts, and the markets. The Chief Executive spoke about Consumer Duty, redress, prudential impacts, and digital and data infrastructure.
Firms were advised the FCA does not intend to trip firms up by going after technical breaches of the Duty and that the regulator’s drive to ensure fair value is not a Trojan horse for price regulation. The FCA:
Will look favourably on firms taking reasonable steps to identify and proactively address concerns
Be pragmatic and focus on the greatest harms
Do not intend to regulate prices or restrain profits for well-run businesses
Aim to mitigate the risk of unintended consequences
The speech also recognises firms approaching the Duty “in the right spirit” by using simpler and more accessible language, reviewing fair value by removing or restructuring fees, and making investment in technology to improve customer insights and service.
Consumer Duty Conference 2024
Alexandra Roberts, Head of Regulatory Policy and Compliance, at our 2024 Consumer Duty Conference talking about the priorities for Consumer Duty this year.
