Personal Finance Expert Comment on FCA’s Consumer Duty Launch

Commenting on today’s (31/07/2023) launch of the FCA’s Consumer Duty, Andrew Michael, personal finance expert at Forbes Advisor says: “The Financial Conduct Authority (FCA), sets the wheels in motion for its new Consumer Duty regime on 31 July.

“This features rules designed to set a higher standard for consumer protection across the UK’s financial services sector.

“The thinking is that the regulation will help to establish a fair financial services marketplace. One that not only promotes healthy competition, but also helps protect vulnerable consumers.

“So far, understandably, this new regulatory landscape has failed to grab the wider public’s attention. But plenty of professionals within the industry have already been grappling with the perceived ramifications for many months.

“This is because Consumer Duty could be a real game changer. Depending on how the rules are enforced, we could see an overhaul of certain retail banking products and greater scrutiny of how fairly businesses treat their customers – an undertaking that has already been around for well over a decade.

“At its heart, the new regime is about financial companies putting the needs of customers first. It means consumers should receive communications they can understand, products and services that offer fair value while meeting their needs, and that customer support is available when required.

“Implemented effectively, it should mean that consumers can have the same confidence in buying their financial products as they do when making other purchases for their homes.

“This includes receiving proactive engagement from their mortgage provider, bank, or insurer on the products they have taken out and whether they would be better off switching to other products.

“The FCA has flagged up concrete expectations of firms – for example, around removing what the regulator terms ‘sludge practices’, such as the ability to buy a product easily, only to experience much more difficulty when trying to exit from it.

“In a new and important obligation, firms will also be expected to take proactive steps to ensure that if there is a risk of consumer harm, it is identified and any remediation is calculated and paid without waiting for customer complaints.

“Of course, having a new set of rules in place is one thing. Ensuring they are adhered to is quite another matter, and proving malpractice in certain instances may not be as clear-cut a process as consumers would like to hope. That said, the FCA has emphasised that it will act assertively to take action against firms who have practices that do not deliver the right outcomes for consumers.

“At its disposal, the regulator will have its usual range of supervisory and enforcement powers, including powers to compel firms to pay redress to customers and ultimately to impose fines.”