A new consumer duty coming into force on Monday will outline new standards for financial companies to follow.
Find out here how it works and what it means for the financial products and services you use.
What has happened?
On Monday, the Financial Conduct Authority introduced a consumer duty requiring companies to put customers at the heart of what they do.
The duty has come into force for new and existing products and services that are open for sale or renewal. It will be introduced on July 31 next year for closed products or services.
It sets higher and clearer standards of consumer protection across financial services.
What will this mean for consumers?
Companies will have to provide helpful and responsive customer service, help customers to make good decisions through timely communications that are easy to understand, and provide products and services that meet consumers’ needs and work as expected.
It should be as easy to complain about or switch and cancel products or services as it is to buy them.
Companies should also be able to explain and justify their price decisions, including being able to show that rates offer fair value.
Vulnerable customers are also at the heart of the duty. This could mean, for example, that companies must make sure there is effective access for those who do not go online regularly.
Do I still need to shop around?
Yes. Customers should still shop around and compare products. The consumer duty will help to arm consumers with information that could make it easier for them to shop around.
What concerns have already been highlighted?
The FCA’s financial lives survey found that one in seven (14 per cent) adults who held one or more financial products had unsuccessfully tried to contact one or more of their financial services providers in the 12 months to May last year.
An estimated 3.6 million people (7 per cent) were able to contact one of their financial services providers but could not get the information or support they wanted.
In May 2022, only 41 per cent of people had confidence in the UK financial services industry, and just over a third (36 per cent) agreed that most financial companies are honest and transparent in the way they treat them.
Adults some form of vulnerability were more likely to report that customer support services did not help them at all to achieve what they wanted to do.
What should the duty achieve in the longer term?
It is hoped that, over time, the duty will improve trust and confidence in financial services.
Companies are required under the duty to act in good faith towards customers, avoid foreseeable harm and enable and support customers to pursue their financial objectives.
What should companies have done to prepare?
The FCA expects boards, or other management bodies, to have clear oversight of consumer duty implementation plans.
Companies should have been asking themselves questions, such as whether they are satisfied their products and services are well designed to meet the needs of consumers in the target market and perform as expected.
They should have also considered how they adapt their communications to meet the needs of customers with some form of vulnerability.
What will happen if what companies do is not up to scratch?
The FCA will monitor companies’ actions to comply with the duty and take steps, including enforcement action if appropriate, if it finds they are consistently not providing good outcomes for their customers.
Updated: July 30, 2023, 11:01 PM