The consumer understanding outcome of the consumer duty aims to reduce poor outcomes by improving the information individuals are given about a product or service.
Speaking to Ozge Ibrahim on the latest Inside FCA podcast, consumer policy manager at the regulator, Richard Wilson explained what exactly this will mean for firms.
“In a nutshell, we want consumers to be given the information they need at the right time and presented in a way they can understand so that when they're applying for, say, a loan or taking out insurance or making an investment, they can understand enough about the product, say how it works, its benefits, risks and costs to be able to make good decisions,” Wilson said.
He added: “That's really important because we want consumers to be in a position to make informed decisions and choose products and services that best meet their needs.”
In addition to the benefit for consumers, Wilson outlined how the FCA expects the consumer understanding outcome to also benefit firms “because they won't be competing against other firms who are perhaps misleading or manipulating consumers with their communications”.
Firms will need to continue to comply with existing sector specific regulations but will also need to now take a “step back” and consider their approach more holistically and ask themselves if there is more they could do to support good customer outcomes.
According to Wilson, this might mean rethinking how some existing mandatory communications are presented to make them more efficient - this might take the form of greater signposting for example.
It could also mean providing simple, plain English explanations of any technical information.
“We know that this type of language - more complex language - can confuse consumers and cause them to disengage, so there's opportunity there to make those communications simpler,” Wilson said.
He noted however that it would be unrealistic to expect that every single communication be tailored to meet the individual needs of each recipient but said firms will need to consider the information needs of target recipients.
For example, firms will need to take into account: