The Financial Conduct Authority (FCA) is set to focus its efforts on clarifying the terms and conditions of finance agreements and making it easier for customers to complain in a new Customer Duty.
The new Duty, which will reportedly be ready for a market launch in July next year, will seek to prevent harm to consumers by making financial agreements easier to understand in the first place.
However, it will also dictate that clear guidance is given regarding how to raise concerns or make a formal complaint in the event of a grievance.
In consultation launched on the FCA website, the governing body stated: “We are proposing to introduce a new ‘Consumer Duty’, that would set higher expectations for the standard of care that firms provide to consumers.
“For many firms, this would require a significant shift in culture and behaviour, where they consistently focus on consumer outcomes, and put customers in a position where they can act and make decisions in their interests.”
According to the FCA, its Consumer Duty will require firms to:
- ask themselves what outcomes consumers should be able to expect from their products and services
- act to enable rather than hinder these outcomes
- assess the effectiveness of their actions
The FCA said that the main aim of the Consumer Duty was to ensure that “fair value” was being offered to consumers.
It said that, while its investigations had uncovered many financial businesses that are already delivering the right outcomes for, it also encountered “too many firms that are not adequately considering the needs of their customers, and prioritising good consumer outcomes as an objective of their business activities”.
The FCA said its Consumer Duty would aim to eliminate the issue of:
- firms providing information which is misleadingly presented or difficult for consumers to understand.
- products and services that are not fit for purpose in delivering the benefits that consumers reasonably expect.
- products and services that do not represent fair value.
- poor customer service that hinders consumers from taking timely action to manage their financial affairs.
- other practices which hinder consumers’ ability to act, or which exploit information asymmetries, consumer inertia, behavioural biases or vulnerabilities.
The FCA said: “In essence, we want to see firms putting themselves in their customers’ shoes, asking themselves questions such as ‘would I be happy to be treated in the way my firm treats its customers?’, or ‘would I recommend my firm’s products and services to my friends and family?’.”
To read the full FCA consultation, and to make a response, click here.