The UK’s Financial Conduct Authority (FCA) is set to introduce a new “consumer duty”, which will require firms to support and empower their customers to make good financial decisions.
The plan comes after the regulator wishes to ensure a higher and more consistent standard for consumer protection within financial services and prevent harm happening. It is currently concerned the current financial services space does not always work well for consumers and hopes its plans will change the mindset of firms.
One of the 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.
As part of this, firms will need to provide customers with information they can understand, offer products and services that are fit for purpose and provide helpful customer service.
Some of the practices the FCA finds unwelcoming are how firms present information in a way that exploits consumers’ behavioural biases, selling products or services that are not fir for purpose or provide poor customer support.
As part of the announcement, the regulator opened a consultation until 14 February 2022. In its consultation, the FCA is seeking feedback and engagement with industry and consumer groups on proposed changes.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:
“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. 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.”
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