Building on its plans for the proposed new Consumer Duty the FCA has issued a further Consultation (CP21/36), which includes a Feedback Statement to CP 21/13. The consultation includes 70 pages of draft guidance to help firms prepare for the new Duty, which the FCA intends will set clearer and higher expectations for firms’ standards of care towards customers.
The proposals include:
- A new Principle 12 – ‘Consumer Duty’ – “a firm must act to deliver good outcomes for retail customers”. This will require firms to consider the reasonable expectations of their customer base as a whole, rather than achieving the absolute best outcome for each and every customer.
- Cross-cutting rules which would set out the key behaviours required by the Consumer Duty and make clear that the Consumer Principle requires firms to act in good faith, and to take all reasonable steps to avoid foreseeable harm to consumers and to enable consumers to pursue their financial objectives.
These rules set out how firms should act to deliver good outcomes and provide greater clarity on the expectations under the new Principle. They also help firms interpret the 4 outcomes.
- Rules and guidance relating to the 4 outcomes, which represent the key elements of the firm-customer relationship (how firms design, sell and service products and services, and the key contact points along the customer journey) and that describe the conditions needed for consumers to be able to obtain fair value in the products and service they buy; they are:
- Products and Services for retail customers must be fit for purpose, designed to meet consumers’ needs and targeted at those consumers. There is significant crossover between the proposed rules and guidance in this section and the existing Product Oversight and Governance rules.
- Price and Value to ensure that consumers to receive fair value (very much in line with the FCA’s insurance pricing ‘fair value’ requirements).
- Consumer understanding is supported and enabled by firms’ communications so consumers are given the information they need, at the right time, presented in a way they can understand, so they can make informed decisions about financial products and services.
- Customer Support at a level that meets consumers’ needs throughout their relationship with the firm to enable those consumers to realise the benefits of the products and services they buy.
The paper includes commentary in relation to:
- the impact of the new Duty on existing FCA guidance in relation to vulnerability;
- confirmation that, at this stage, that there will be no private right of action (PROA) for breaches of the Consumer Duty (initially discussed in the first Consultation); and
- monitoring consumer outcomes.
Appendix 2 of the Consultation contains lengthy draft non-Handbook guidance which contains useful examples of good and bad practice, and behaviour that could lead to outcomes which would be likely or unlikely to satisfy the Consumer Duty.
The consultation is open until 15th February 2022 and the FCA expects to confirm any final rules by the end of July 2022
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