Some firms need to step up preparations for new consumer duty – City regulator
New rules come into force on July 31 2023 which will set higher standards of consumer protection across financial services.
Some firms could be at risk of struggling to apply a new consumer duty effectively when it comes into force in six months’ time, according to the City regulator.
The consumer duty will set clearer and higher standards of consumer protection across financial services, requiring firms to put customers at the heart of what they do.
Firms, including senior managers and boards, will be held accountable for delivering good outcomes for consumers.
The Financial Conduct Authority (FCA) reviewed a sample of implementation plans.
It found many firms show they understand and embrace the changes and have established extensive programmes of work to comply.
But the FCA also said some firms are further behind in their planning and there is a risk that they may struggle to apply the duty effectively once the rules come into force.
The rules come into force on July 31 2023 for new and existing products or services that are open to sale or renewal, and July 31 2024 for closed products or services.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “The consumer duty will bring about a step change in the way financial services firms treat their customers and we welcome the work firms are doing to implement it.
“Given the scale of the reform, we recognise that some firms need to make significant changes. For firms which are further behind in making the necessary changes, there is time to put that right and for them to show they are acting in the spirit of the new duty.
“Firms will also see the benefits of the duty, with increased trust in the sector, more flexibility to innovate and, in time, fewer rule changes.”
Over the next six months, the FCA wants firms to focus particularly on prioritising effectively, including on the areas that will make the biggest impacts on outcomes for consumers.
The regulator is also urging firms to ensure customers receive communications they can understand, products and services that meet their needs and offer fair value, and that consumers receive the customer support they need, when they need it.
It said firms need to share information and work closely with their commercial partners to make sure they are all delivering good customer outcomes. The FCA has found that some firms need to accelerate this work to implement the duty on time.
Parliament has given the FCA a mandate to introduce the duty through the Financial Services Act 2021.