Consumer duty summary – what do the new rules mean for you?
Consumer Duty is widely believed to be the biggest change in UK financial regulations since 2008. These new rules brought in by the Financial Conduct Authority (FCA) are intended to protect consumers and stop mistreatment of customers in the financial services industry.
But what does this mean for you and your life? These new rules should (ideally) stop you facing unfair price hikes, ridiculous interest rates and poor service that means you lose out financially.
We think Consumer Duty is a welcome step toward better practices and fair treatment for all. This is something we are incredibly passionate about, and we truly believe everyone has a right to fully understand what they’re buying and how it works.
What is Consumer Duty?
FCA’s Consumer Duty regulations is a brand-new set of rules that have been introduced by the Financial Conduct Authority (FCA). These rules have been specifically designed to better protect consumer rights and make sure it’s much harder for businesses to mislead or mistreat customers.
This includes regulations which mean businesses must:
- Ensure consumers can switch or complain to new products more easily
- Be able to justify any changes in price represent ‘fair value’ for their customers
- Stops consumers being ripped off by extra fees and charges
- Provide sufficient and accessible support for their customers
- Make sure all key information about products and services is clear and easy to understand (not hidden in lengthy terms and conditions)
- Only recommend products to customers that are appropriate for their needs
- Help customers to make ‘good decisions’ which will benefit them
The main thing that the FCA are pushing for is ‘good outcomes’ for all customers. No one deserves to be ripped off or misled, leading to losing out financially. These new rules should make it much harder for this to happen.
What do Consumer Duty rules apply to?
Consumer Duty has been developed for financial services so the new rules will apply to any businesses that sell:
- Life Insurance
- General Insurance
- Home Insurance
- Critical Illness Cover
- Income Protection Insurance
- Credit Cards
- Current Accounts
- Savings Accounts
- And more…
Why has Consumer Duty been introduced?
For too long, firms and providers have been able to get away with putting financial gain over the needs of their customers. This is completely wrong and Consumer Duty aims to prevent this from happening.
The FCA conducted a ‘financial lives’ survey in 2022 and the results were pretty shocking, but sadly unsurprising. The survey showed:
- 24% of UK adults (2.9 million) have ‘low financial resilience’ meaning they would be unable to cope with increased financial pressures e.g. from unfair price rises
- 45% of UK adults find keeping up with bills and credit arrangements a ‘burden’
The new focus on ‘fair value’ for customers will work to stop more people unfairly being pushed into financial difficulty by being ‘ripped off’ or not being made aware of better deals becoming available. This will be particularly useful for people who are struggling due to the UK cost of living crisis.
The fact is many customers also struggle with getting in touch with their insurer, bank or mortgage provider if they have a problem. Or they may be able to get in touch, but there are so many steps or so much waiting around that they end up just giving up.
What are the ‘Consumer Duty outcomes’?
If you’ve done a bit of digging, it’s possible you’ve come across the phrase ‘Consumer Duty outcomes’. This is where the Financial Conduct Authority has outlined the 4 positive changes they expect to come from these new regulations.
FCA Consumer Duty guidance states these 4 outcomes are:
|Businesses need to work to achieve good outcomes for their customers and only promote suitable products.
|Price & Value (Fair Value)
|Businesses need to consider the value their products and services offer customers and make sure they are up to standard.
|Businesses need to ensure all communications with customers are clear and understandable. It is important customers understand what they are buying, including any risks.
|Consumers should receive the right support when they need it. Business also need to support consumers in making good decisions.
When is the Consumer Duty deadline?
So, the official Consumer Duty deadline has passed. Businesses were expected to have started implementing changes from 31st July 2023.
Plans were first put forward for Consumer Duty at the end of 2022, so businesses have known these changes were coming for a while.
Will new Consumer Duty (FCA) rules help savers?
It’s possible that Consumer Duty will have a positive effect on people trying to save money and those repaying finance arrangements e.g., mortgages, car finance, credit cards etc.
Interest rates have climbed over the last year in the UK, with 13 consecutive increases. The current UK base interest rate sits at 5%, with changes expected this week. It is highly likely rates will continue increasing – or at the very least won’t decrease much for a while.
Consumer Duty should help prevent businesses automatically passing on higher rates which lead to huge price hikes for their customers.
By the 31st of August 2023, financial businesses (e.g., banks, building societies) will need to be able to prove how their rates offer customers ‘fair value’.
What has the FCA said about consumer duty?
The FCA has made several announcements about how they believe Consumer Duty will work and how it will help people including you and your family.
The most recent statement has come from Sheldon Mills, who is the FCA’s Executive Director of Consumers and Competition. When talking about Consumer Duty, he had this to say:
“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 FCA also recommends that if you’re having any issues with your provider, you should contact the Financial Ombudsman Service for further advice and support.
Here are more of our most recent articles that contain useful information for UK consumers. We work hard to provide clear and easy to understand information, so everyone can have a good understanding of the issues that might affect them.
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