What is Consumer Duty?

What is Consumer Duty?
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The Financial Conduct Authority (FCA) in the UK proposed a new "Consumer Duty" to ensure that firms provide higher standards of care for their customers. This duty aimed to ensure that consumers are provided with products and services that genuinely meet their needs and that they are not misled.

Here's a brief overview of the proposed Consumer Duty:

  1. Principle of the Duty: The overarching principle of the Consumer Duty is that firms must act in the best interests of their consumers.
  2. Three Key Pillars:
    • Consumer Principle: This reinforces the notion that firms should act in the best interests of consumers.
    • Cross-cutting Rules: These rules would require firms to take all reasonable steps to avoid causing foreseeable harm to customers, to take all reasonable steps to enable customers to pursue their financial objectives, and to eliminate practices that could materially disadvantage customers.
    • Four Outcomes: The FCA has outlined specific outcomes they expect under the Consumer Duty. These include that:
      1. Products and services are designed to meet the needs of consumers.
      2. Products are marketed in a way that only targets consumers for whom they are suitable.
      3. Consumers receive clear information before engaging with a product or service.
      4. Products perform as consumers are led to expect, and the associated service is of an acceptable standard.
  3. Implementation: The Duty came into effect in July 2023

This new duty aimed to ensure a shift in financial services culture rather than simply technical compliance, where firms prioritize consumer interests at the heart of their businesses. The Consumer Duty was seen as a way to provide clearer expectations for firms, thus reducing the potential for consumer harm and increasing trust in the financial services sector.

To get the most up-to-date details on the FCA Consumer Duty, its final shape, and any associated regulations or guidelines, you'd need to check the FCA's official website or other authoritative financial news sources such as FTAdviser.com.

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