{"id":126,"date":"2022-11-17T07:51:00","date_gmt":"2022-11-17T07:51:00","guid":{"rendered":"https:\/\/iqeq.com\/gb\/2022\/11\/17\/fcas-new-consumer-duty-what-it-means-uk-firms\/"},"modified":"2024-08-07T15:20:54","modified_gmt":"2024-08-07T15:20:54","slug":"fcas-new-consumer-duty-what-it-means-uk-firms","status":"publish","type":"post","link":"https:\/\/iqeq.com\/gb\/insights\/fcas-new-consumer-duty-what-it-means-uk-firms\/","title":{"rendered":"The FCA\u2019s new Consumer Duty: what it means for UK firms"},"content":{"rendered":"
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In July 2022, the UK\u2019s Financial Conduct Authority (FCA) published a policy statement for a new\u00a0Consumer Duty<\/a>\u00a0that will combat a number of poor practices across the financial services sphere by setting higher and clearer standards of protection for retail consumers.<\/strong><\/p>\n

Specifically, the FCA is taking aim at poor customer support, unfair valuations of products, products unfit for purpose, and behavioural biases. The new duty will address these practices by requiring firms to act to embed positive consumer outcomes in all aspects of their business.<\/p>\n

Consumer Duty vs TCF: What\u2019s changing?<\/h2>\n

The new duty will add to the FCA\u2019s Principles for Business, operating alongside the familiar \u2018Treating Customers Fairly\u2019 (TCF) principle. But how do the two concepts differ?<\/p>\n

While TCF focuses on the need for firms to pay due regard to the interests of their customers and treat them fairly, the new duty goes further and raises the bar higher than before. Key differences between the TCF and the new duty include:<\/p>\n<\/div>\n<\/div>\n

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Moving from framework to measurable outcomes<\/h2>\n

TCF was introduced to ensure firms have the right infrastructure, culture and framework to\u00a0enable<\/em>\u00a0<\/strong>the fair treatment of consumers. Under TCF, it\u2019s the framework that is questioned by the regulator.<\/p>\n

The Consumer Duty seeks to quantify compliance, requiring firms to demonstrate to the regulator the\u00a0effectiveness<\/strong>\u00a0of their frameworks through\u00a0delivery of good outcomes<\/strong>\u00a0for the consumer.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Shift in responsibility<\/h2>\n

TCF made it the regulator\u2019s responsibility to decide if a firm has acted in bad faith.<\/p>\n

The Consumer Duty\u00a0places direct responsibility on the firms themselves<\/strong>\u00a0comply with the duty. Firms must prioritise customer care standards and demonstrate to the regulator that customers have a clear understanding of the products\/services they are buying and that they achieve good outcomes from them.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Clear definitions and evidence<\/h2>\n

Under TCF, firms provided complaints data as an indicator of customer outcomes \u2013 assuming that if someone does not complain, they are content.<\/p>\n

This will fundamentally change under the Consumer Duty, as firms will need to\u00a0define \u2018good outcomes\u2019<\/strong>\u00a0and how they can be achieved\u00a0throughout the customer journey<\/strong>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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In short, while TCF challenged whether a firm\u2019s TCF framework is appropriate, the new duty asks customers to showcase whether their customer outcomes are good.<\/p>\n

What needs to be done?<\/h2>\n

The Consumer Duty applies throughout the entire distribution chain for all retail customers. Firms must achieve compliance across four specific areas:<\/p>\n