Consumer Duty

The Consumer Duty came into effect for open and closed products and services on 31 July 2024.

The new consumer principle says that firms must “act to deliver good outcomes for retail customers.” This principle is support by various cross-cutting rules and detailed regulations around customer outcomes including products and services, price and value, customer understanding and consumer support.

On 27 July 2022, the Financial Conduct Authority (FCA) published its finalised rules and guidance for firms on the Consumer Duty. According to the FCA its “new Duty sets higher and clearer standards of consumer protection across financial services, and requires firms to put their customers’ needs first”. The Consumer Duty will continue to underpin future FCA policy and regulation, as well as the way firms operate.

Background

By introducing the new Consumer Duty, the FCA intends to raise industry standards by putting the emphasis on firms getting products and services right the first time. The new rules require firms to focus on supporting and empowering customers to make good financial decisions and avoiding foreseeable harm at every stage of the customer relationship. Firms have to provide consumers with information they can understand, offer products and service that are fit for purpose and provide helpful customer service.

The cross-cutting rules are at the heart of the Consumer Duty. These require firms to:

Act in good faith towards retail customers
Avoid causing foreseeable harm to retail customers, and
Enable and support retail customers to pursue their financial objectives

The FCA has already begun to use more assertive supervision and its new data led approach to intervene quickly when it identifies practices which do not deliver for consumers and will continue to do so for the foreseeable future.

The Consumer Duty remains a priority for the ABI following its launch last year and features regularly on the agenda of our Board and senior committees including General Insurance, Long Term Savings, Health and Protection and Conduct Regulation.

Ways we are supporting our members to implement the Consumer Duty

Engaging with members and the FCA

Highlighting any implementation issues and to develop a shared understanding of how the Consumer Duty is different from the previous standard of ‘treating customers fairly.’ We have also arranged speaking opportunities for senior FCA and Financial Ombudsman Service executives to talk to our members and to answer their questions.

Seminars and other member events

At these events we share information on both the ‘how’ and the ‘why’ of implementing the Duty. We also host a regular consumer duty implementation working group for member firms to exchange views and best practice which is now a monthly ‘consumer duty forum’.

Consumer Committee

We have used our consumer committee to talk to representatives of consumer groups to understand their concerns and their hopes for how the industry should respond to the duty.

Industry collaboration

We share our insights with other trade bodies to ensure that where issues have broader application across financial services, we can act together in the interests of our members and their customers.

Advocacy

Actively promoted the importance of financial guidance and advice in being able to deliver good customer outcomes and the need for Government and the FCA to address this through the advice guidance boundary review