Yahoo Finance FCA to introduce new consumer duty
The UK's Financial Conduct Authority (FCA) is to introduce a new consumer duty in order to better protect users of financial services and help to "stop harm before it happens".
The new rules will help tackle harmful practices such as providers of financial services 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.
The FCA wants to "drive a fundamental shift in industry mindset" by raising industry standards and helping firms to get products and services right in the first place, rather than providing services that do not work well for consumers.
The new rules will mean firms will have to place emphasis on supporting and empowering their clients to make good financial decisions and avoid foreseeable harm throughout the customer relationship.
Firms will be required to provide customers with information they can understand, offer products and service that are fit for purpose and provide helpful customer service.
The FCA said it will use "assertive supervision" and a new data led approach to intervene quickly when it finds practices which are not working in consumers' best interests.
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"Making good financial decisions is vital to financial well-being and trust, but too often consumers are not given the information they need to make good decisions and are sold products or services that do not offer the benefits they might expect. We want to change that," said Sheldon Mills, executive director of consumers and competition at the FCA.
"We’ve been working to set a higher standard for firms, to put more of the onus on them to act in their customers’ interests and get their products and services right.
"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."
The final rules will be confirmed by the end of July 2022.
Moira O’Neill, head of personal finance, Interactive Investor, said: “Little over a year since the FCA dropped its work on investment platform exit fees, it seems they are now back on the radar — and not before time. That said, we’re alarmed to see the regulator single out ‘unreasonable’ exit fees — all exit fees are unreasonable. It’s a privilege, not a right, to administer customer money, and they should be allowed to leave without penalty.
“Exit fees are a recipe for rip offs and should never have been taken off the table. While we’ve led on removing the stain of exit fees from the sector, some still charge them. And where there’s scope to charge them, there’s scope for the direction of travel to change.
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Becky O’Connor, head of pensions and savings, Interactive Investor, said: “People’s financial wellbeing depends not just on the price they are paying, but accessing what they need, when they need it. There is more to the suitability of a financial product than price: service is massively important but so is making sure that people are accessing the right products for their individual needs and are able to act if a product isn’t right.
“This is especially important for ‘big ticket’ financial products, like pensions, which by their nature can be with you for decades and for which you can pay a lot, over the years, whether you are getting a good standard of service, or the right kind of pension product for you, or not.
“The long term nature of pensions and customer inertia, as with current accounts, means there could be a tendency among the businesses managing them to become complacent and take customers for granted.”
