What has happened?
In May 2021, the FCA set out in its consultation paper CP 21/13 its plans for a new non-statutory Consumer Duty, which is intended to result in a higher level of consumer protection in retail financial markets, including payment services and e-money markets.
What do you need to do?
The Consumer Duty is intended to set, via a package of measures designed to more effectively tackle the harms seen in financial services markets and their causes, a higher standard of consumer care beyond the current set of FCA Principles and Rules. As the consultation paper expresses it, “for many firms, this would require a significant shift in culture and behaviour, where they consistently focus on consumer outcomes, and put customers in a position where they can act and make decisions in their interests”
The Consumer Duty, which producer and distributor firms will have to follow even if they have no direct relationship with the retail client, will have three key elements applying to all of a firm’s activities, as shown graphically below:
- The Consumer Principle (to be included in the Principles sourcebook), which will reflect the overall standards of behaviour the FCA expects from firms. The alternative wordings being consulted on are: ‘a firm must act in the best interests of retail clients’ or ‘a firm must act to deliver good outcomes for retail clients’,
- Cross-cutting rules would require three key behaviours from firms, namely taking all reasonable steps to avoid foreseeable harm to customers, taking all reasonable steps to enable customers to pursue their financial objectives and acting in good faith, and
- A suite of rules and guidance that set more detailed expectations for firms’ conduct in relation to four specific outcomes – communications enabling customers to make informed decisions, products and services being fit for purpose, customer service meeting customers’ needs and price and value.
The consultation is open for comment until 31 July 2021 and the FCA expects to consult again on proposed rule changes by the end of 2021 and to make any new rules by the end of July 2022. The FCA is also consulting on the potential benefits of attaching a private right of action to the new Duty, and what any unintended consequences of this right might be.
Firms can sign up to join an FCA webinar on 10 June to hear more about the proposals. Details are available here.
How can we help you?
If you’d like to know more about how we can help you with your firm’s cultural, TCF or vulnerable customers arrangements, or any other regulatory compliance issues, our expert team is here to help.
Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.