The FCA published a consultation paper today setting out its proposals for a new "Consumer Duty".
The FCA continues to see practices by firms in retail sectors that cause consumer harm, including firms providing information that is difficult to understand or misleading to consumers. The Consumer Duty will set clearer - and stronger - standards for firms' culture and conduct.
Under the FCA's proposals, the Consumer Duty will have 3 key elements:
- The "Consumer Principle": 'A firm must act to deliver good outcomes for retail clients' or 'A firm must act in the best interests of retail clients'. Whichever is chosen - this raises the bar from the FCA's existing Principle 6 (to have due regard to customers' interests and treat them fairly).
- The 'Cross-cutting rules': Firms will be required to (i) act in good faith; (ii) take all reasonable steps to avoid foreseeable harm to consumers; and (iii) take all reasonable steps to enable consumers to pursue their financial objectives.
- The Four Outcomes: These are detailed expectations in relation to four elements of the firm-consumer relationship: (i) communications; (ii) products and services; (iii) consumer service; and (iv) price and value.
The FCA is also consulting on a possible private right of action - effectively meaning that customers could bring firms to court for a breach of the Consumer Duty.
A fundamental shift to the FCA's Principle 6 with wide-ranging impacts for firms and consumers - this is one to follow.
'We want firms to be putting themselves in the shoes of consumers and asking ‘would I be happy to be treated in the way I treat my customers?’. We want consumers to be able to advance their financial wellbeing and build positive futures for themselves and their families.'