FCA: Why we are introducing a new consumer duty

“Lastly, the consumer duty places much greater emphasis on consumer outcomes. Now that will mean a shift by firms from following the right process, and ticking the right boxes to focusing on the outcomes that consumers get, and will be expecting firms to be considering consumer outcomes throughout the whole consumer journey right from product design, to delivery, and after sales service.”

Arora explained the protocol and said that as well as a shift for firms, it will also require the regulator itself to take a different approach on how it supervises the consumer duty. 

Different words

Arora said the FCA was consulting on two sets of wording for its new principle.

The first, “a firm must act to deliver good outcomes for retail clients”, or the second, “a firm must act in the best interest of retail clients”. 

The difference between these two proposed formulations are not intended to be a substantially different standard from each other, she explained.

“And the best interest proposal isn't intended to create a fiduciary duty. It's to be clear, whatever the wording of the top line principle, its meaning could be clarified and amplified by the rest of the package of rules and guidance beneath it. 

“So, once we consider that, either one of the formulations would deliver the policy intent. They do have a difference in tone, and we'd like to hear your views on how they resonate with you and which you think better reflects our policy intent.”

The FCA said these rules required firms to act and conduct themselves in a way to ensure good consumer outcomes are delivered. 

Arora added: “First is the requirement to take all reasonable steps to avoid causing foreseeable harm. Whilst firms should take active steps to avoid harm this doesn't mean that consumers will be protected from all bad outcomes. 

“Sometimes harm will occur due to circumstances that weren't foreseeable or that were outside of a firm's control or because of a risks that a firm reasonably believed the customer understood and accepted.

“Now this is about firms understanding their customers, including their behavioural biases and their vulnerabilities, and ensuring the environment they create through their conduct and engagement enables and supports their customers to make decisions in their interests.”

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