The Financial Conduct Authority has taken a further step towards stronger consumer protection for users of financial services with the publication of more developed proposals for new rules to tackle the causes of harmful practices.
Its latest consultation sets out and takes on board feedback and engagement with industry and consumer groups following initial proposals published in May. The new rules will raise industry standards by putting the emphasis on firms to get products and services right in the first place.
The FCA is aiming to tackle harmful practices such as firms presenting information in a way that exploits consumers’ behavioural biases, selling products or services that are not fit for purpose, or providing poor customer support.
A new consumer principle will be set down, that "a firm must act to deliver good outcomes for the retail consumers of its products". The principle will be underpinned by new rules designed to ensure "a cultural shift in how firms focus on consumers". The FCA intends this to feed through to how firms design products and services, as well as how they communicate and provide customer service.
New rules will require firms to focus on supporting and empowering their customers to make good financial decisions and avoiding foreseeable harm at every stage of the customer relationship. Firms will have to provide consumers with information they can understand, offer products and service that are fit for purpose and provide helpful customer service.
The FCA will use assertive supervision and its new data led approach to intervene quickly when it identifies practices which do not deliver for consumers.
Alongside today's consultation, the FCA has published draft guidance to help firms prepare before the introduction of the new Duty.
The consultation is open until 15 February 2022 and the FCA expects to confirm any final rules by the end of July 2022. The latest publication meets the FCA’s obligations under the Financial Services Act 2021.
Sheldon Mills, executive director of Consumers and Competition at the FCA, commented: "The new duty will drive a change in culture at firms. We expect firms to step up and put consumers at the heart of what they do and we’ll be holding senior managers accountable if they do not. The duty will also help create an environment for healthy competition between firms, encouraging them to be innovative in developing products and services that meet consumer's needs."