Out-Law News 1 min. read
31 Jul 2023, 3:44 pm
The Consumer Duty, which comes into force today, is the “most significant change to financial services regulation” in a decade, according to one legal expert.
The new regulation, introduced by the UK Financial Conduct Authority (FCA), applies to all new financial services products, and to all products and services currently available to customers. The duty requires financial firms to act in good faith, avoid foreseeable harm and enable and support their customers to achieve their financial objectives.
Financial services regulation expert Venetia Jackson of Pinsent Masons said the UK financial services industry had not seen a similar regulatory upheaval since the creation of the FCA itself in 2013. “From today there are now detailed rules in force backing up the FCA’s clear expectations of how firms should be thinking about, engaging with and treating their customers.”
“Businesses have been working incredibly hard over the past year to implement the duty and from the depth and breadth of their implementation programmes we have already seen the enhanced customer focus being firmly embedded in their processes,” she added.
From today there are now detailed rules in force backing up the FCA’s clear expectations of how firms should be thinking about, engaging with and treating their customers
To comply with the new duty, all financial products and services available to customers must have gone through processes to ensure they are suitable for, and distributed to, their target markets. Financial firms must also ensure their services and products provide fair value. Additionally, customer communications must be understandable and customers can expect support that meets their needs.
Financial enforcement expert Jonathan Cavill of Pinsent Masons said the new duty was an opportunity for businesses to build consumer trust. A survey published by the FCA last week found that just 41% of UK adults have confidence in the financial services industry.
“Firms have done a lot already to implement the duty, but this is a living piece of regulation. Today is just the start. The duty requires firms to implement an ongoing feedback and improvement cycle for all their products and services and to be pro-active in addressing issues,” Cavill said.
He added: “We expect the FCA to be actively looking at how firms have implemented and to be looking to take action where they are not satisfied with implementation efforts. From this point onwards, firms will also need to consider the duty in customer complaints they receive and the Financial Ombudsman Service will be able to look at the duty in complaints for conduct after today’s date.”
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