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The financial services watchdog says the new rules will help support better consumer protection and help fight “rip-off” charges.
Image source: Sheldon Mills, FCA Executive Director
The Financial Conduct Authority (FCA) has confirmed its plans for a new Consumer Duty.
The watchdog said the new measures will set “higher and clearer” standards of consumer protection across financial services and require firms to put their customers’ needs first, fundamentally improving how firms serve consumers.
The Duty will mean that consumers should receive communications they can understand, products and services that meet their needs and offer “fair value”, and that they get the customer support they need according to the watchdog.
In addition, the FCA said the duty will include requirements for firms to end “rip-off” charges and fees and to make it as easy to switch or cancel products “as it was to take them out in the first place”.
Other measures set to be implemented include forcing banks to provide helpful and accessible customer support and “not making people wait so long for an answer that they give up”.
Financial services firms will also have to provide timely and clear information that people can understand about products and services so consumers can make good financial decisions, rather than “burying key information in lengthy terms and conditions that few have the time to read”.
The new measures will include rules forcing financial services firms to cater to the needs of the vulnerable.
Firms are getting 12 months to implement the new rules for all new and existing products and services that are currently on sale.
The rules will be extended to closed book products 12 months later, to give firms more time to bring these older products, that are no longer on sale, up to the new standards.
The impacts of Consumer Duty on the wider financial services industry are as of yet unknown, research from Schroders has found that 53% of financial advisers are concerned about the new rules, while 30% say it will have no impact on their business.
However, the FCA’s new measures are likely also needed, the watchdog’s 2020 Financial Lives survey found only 10% of consumers strongly agreed they had confidence in the UK financial services industry.
Neil Kadagathur, co-founder and CEO of Creditspring, commented that with the cost-of-living crisis and high inflation any extra consumer protections will be more than welcome, as it is vital that consumers are protected from unscrupulous lenders charging extortionate repayment terms.
“Ending high borrowing charges and fees will provide a lifeline for households who otherwise risk falling into an unmanageable debt spiral,” said Kadagathur. “By forcing lenders to provide clear and accurate information around charges and repayment terms, borrowers are empowered to make improved financial decisions”.
Sheldon Mills, executive director of consumers and competition, said: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first.
“The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards”.
He added: “As the Duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”
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