In July 2022, the Financial Conduct Authority (FCA) published its final policy, rules and guidance on the new Consumer Duty (“the Duty”). Subject to some exclusions, the Duty applies to products and services offered to retail customers and has the aim of setting higher and clearer standards for firms providing such products and services, resulting in better protection of retail customers and the promotion of competition amongst firms and service providers.
In essence, this new Duty requires that firms put consumers at the heart of their business and focus on delivering good outcomes for customers. It puts a stronger focus on customers’ interests and outcomes, going beyond a narrow “tick-box” focus on compliance with the FCA rules. A firm will need to consider the Duty at every stage of its processes and at every level of its organisational structure.
The FCA believes that the Duty will give firms more certainty about the standards it expects of them and the standards that consumers can expect of firms. The Duty is designed to reinforce and complement the FCA’s existing handbook requirements (for example, the current Principles for Businesses and the conduct of business rules). Firms should ensure that the needs of vulnerable customers continue to be addressed effectively and that vulnerable customers achieve outcomes that are as good as those of other consumers.
Firms do not have a responsibility to protect customers from all foreseeable harm. Many financial products involve the risk of adverse outcomes for consumers (for example, investments may carry a risk of capital loss) – firms are not required to protect consumers from risks that are understood and accepted.
The FCA makes it clear that the Duty will not apply retrospectively to past business – it will apply on a forward‑looking basis to existing products and services, including closed book products and services.
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