Consumer Duty refers to the rules and legal requirements put in place by the Financial Conduct Authority to improve Consumer protection for financial-services firms within the UK. The rules, brought into effect in summer 2023, are some of the most dramatic changes seen in many years and will likely see a drastic shift to a bigger focus on the consumer than ever before. The new rules will see a huge change for many firms over the coming years, with the FCA keeping a closer eye on businesses to ensure good practice.
The FCA’s updated Consumer Duty rules and guidance for current products and services came into effect on July 31st, 2023, and are designed to ensure that retail financial service business always put the interests of their customers at the forefront of their overall operations. Most notably, the new Consumer Duty is a major shift away from the more specific and detailed regulations that allowed businesses be more selective with which rules they chose to abide by, instead opting for an overall expectation of customer-friendly practices. As a result of the new regulation, customers are now guaranteed a more positive experience and overall better treatment while using financial services including credit cards, loans, property mortgages, investments, savings accounts and pensions. The main focus of the updated ruleset is on what the FCA refers to as “cross-cutting” rules. This sets out how businesses should act to deliver positive outcomes for customers. The three rules are –
To ensure co-operation, the FCA warned business that if they discovered any risk of harm to the consumer, it may result in “robust action such as interventions or investigations, along with possible disciplinary sanctions”.
The FCA supervisory approach refers to the regulatory oversight conducted by the FCA, designed to ensure financial firms are working in a way that protects the interests of consumers, as well as guaranteeing the integrity and reputation of the overall financial system. The goal is to ensure all firms are upholding the rules put in place, and assisting firms where they fall short. The FCA’s updated approach will consider whether or not the companies in question have sufficiently implemented and continuously upheld a good balance between both their own commercial interests, and ensuring they deliver positive customer outcomes. The FCA’s own supervisors will decide whether or not the firm is properly focused on its customers and has an appropriate purpose and associated business model. The new rules put a stricter ruleset on firms with tougher punishments for those who they feel aren’t upholding the rules appropriately.
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