The FCA said: "We agree that it must be clear that what is reasonable under the consumer duty is an objective test and not something that firms can define for themselves. We have introduced an objective standard which firms need to comply with based on the tortious concept of how a reasonable prudent firm would act. We know that firms are already familiar with this concept due to existing duties at common law.
“We are not proposing to change the overall structure of the consumer duty. The consumer principle sets out at a high level, the behaviour we want from firms. The cross-cutting rules set out how firms should act to deliver good outcomes for consumers.”
The City watchdog said it was seeking views on the proposals until February 15, 2022.
It expects to publish the policy statement summarising responses and making any new rules by July 31, 2022.
Based on this timeline, firms should have until April 30, 2023 to fully implement the consumer duty.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Making good financial decisions is vital to financial well-being and trust, but too often consumers are not given the information they need to make good decisions and are sold products or services that do not offer the benefits they might expect. We want to change that.
“We’ve been working to set a higher standard for firms, to put more of the onus on them to act in their customers’ interests and get their products and services right.”
Mills added: “The new duty will drive a change in culture at firms. We expect firms to step up and put consumers at the heart of what they do and we’ll be holding senior managers accountable if they do not.
“The duty will also help create an environment for healthy competition between firms, encouraging them to be innovative in developing products and services that meet consumer's needs.”
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