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A new consumer duty has come into force, setting a higher bar for financial firms and giving customers more certainty that the product they are taking out does exactly \u201cwhat it says on the tin\u201d.<\/p>\n
Overseen by the Financial Conduct Authority (FCA), it sets higher and clearer standards of consumer protection across financial services, requiring firms to put customers\u2019 needs at the heart of what they do.<\/p>\n
The impacts of the new duty wfiill be far-reaching, weaving through the design of financial products through to the way firms treat their customers.<\/p>\n
Over time, it is hoped the duty will improve trust and confidence in financial services.<\/p>\n
It could help to prevent rip-offs, unexpected charges, and potential future mis-selling scandals from happening in the first place.<\/p>\n
READ MORE: <\/strong> Savings firms ordered to inform customers of best available rates<\/strong><\/p>\n Under the duty, firms will have to provide products which are fit for purpose, offer fair value and work as the customer expects.<\/p>\n The duty could also potentially help prevent people from being sold unnecessary \u201cadd-ons\u201d to financial products, stopping them from wasting money.<\/p>\n Firms should also be able to explain and justify their pricing decisions.<\/p>\n Nisha Arora, director of cross-cutting policy and strategy at the FCA, said: \u201cPeople should know what they are paying and know what they are getting for what they pay.\u201d<\/p>\n Asked what consumers will see from the higher standards, Ms Arora said firms will have to actively support and enable their customers to achieve their financial objectives.<\/p>\n Don’t miss… <\/strong> \u201cIt\u2019s about helping their customers, rather than just sitting back,\u201d she told the PA news agency.<\/p>\n \u201cIf we translate that into practice and the whole consumer journey, if I want a product or a service, I will know that it\u2019s fit for me, it\u2019s fit for use, it\u2019s the right thing for me and it offers fair value, so I\u2019m not being ripped off.<\/p>\n \u201cI will also get communications at the right time, and that I can understand and can help me make decisions.<\/p>\n \u201cIt\u2019s really important consumers still shop around for the best deals, but firms need to give them the right information so they can make those decisions.\u201d<\/p>\n Firms will have to provide helpful and responsive customer service under the duty and be timely and straightforward in how they communicate.<\/p>\n We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info<\/p>\n Processes for complaining, switching and cancelling products should also be straightforward.<\/p>\n Ms Arora said: \u201cWhat we want (firms) to do is make it as easy to switch, complain, move product or service, as it was to come in, and not have to go through all those hoops and hurdles to make things happen.\u201d<\/p>\n There have been some recent signs of firms improving their savings offerings ahead of the duty, following criticism from various sources that rate rises were not being passed on quickly enough.<\/p>\n Under the duty, the FCA expects firms to have a strategy to keep savers adequately informed of available rates across their products and how they may benefit from switching to an alternative.<\/p>\n Together with the Information Commissioner\u2019s Office (ICO), it recently wrote to UK Finance and the Building Societies Association (BSA), clarifying that savings providers can inform their customers of the best rates available to them, even where they have objected to direct marketing.<\/p>\n Ms Arora said: \u201cIn all markets, including in the savings market, the consumer duty will require all products to be fair value. If there are different groups of customers, each of them have to get fair value.<\/p>\n \u201cThey might have different rates, but they all need to be fair value. And importantly, the communications need to be there to enable and support customers. (Firms) have to give them the right information.<\/p>\n \u201cIf someone is on a lower rate, they should point them to better rates that may be available. Now, it\u2019s up to the customer to decide what to do and they need to shop around.\u201d<\/p>\n Vulnerable customers\u2019 needs are also at the heart of the new duty.<\/p>\n The FCA\u2019s financial lives survey previously indicated adults with characteristics of vulnerability were more likely to report that customer support services did not help them at all to achieve what they wanted to do.<\/p>\n Ms Arora said firms will be expected to understand the needs of vulnerable customers, adapt and be flexible.<\/p>\n She said: \u201cIt might be around designing products that are suitable for the market, it might be around communicating in a particular way that\u2019s helpful and supportive.\u201d<\/p>\n Asked whether there might be a risk that firms could be more inclined to \u201cscreen out\u201d some customers for products, Ms Arora told PA: \u201cWe\u2019ve taken this very seriously because what we don\u2019t want is unintended consequences with products either being withdrawn from the market or customers being declined appropriate products.<\/p>\n \u201cIf a product, though, is unaffordable or not appropriate, then obviously we don\u2019t want it to be offered to the customer.\u201d<\/p>\n She said the regulator has already taken several steps, including being very clear and supporting firms, so \u201cactually these are higher standards, but they are achievable by firms\u201d.<\/p>\n Ms Arora also pointed out the communications requirements for firms under the new duty will help consumers to access products.<\/p>\n Businesses have been gearing up for the new duty, and the regulator expects firms to have had clear oversight, from the top, of their implementation plans.<\/p>\n The FCA has been supporting firms with guidance, webinars and letters.<\/p>\n Ms Arora said: \u201cI\u2019m really pleased by the progress that many firms have made in getting ready for this. But we will be ready to enforce if we see non-compliance that drives harm, and creates harm, for consumers.<\/p>\n \u201cWe have started our monitoring and we will be continuing to gather data from firms. We will be ready to supervise and enforce to make sure that the duty really is driven home.\u201d<\/p>\n
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