6 KEY TAKEAWAYS ON THE NEW 'CONSUMER DUTY’

1.Timelines

In May 2021, the FCA published a consultation paper on the consumer duty, it sets clearer and higher standards of consumer care. You can submit feedback up to 31 July 2021. The FCA expects to publish the second consultation by 31 December 2021 and any new rules by 31 July 2022.

2. Scope of the proposal 

It applies to firms in respect to their regulated activities and products and services sold to retail clients. Retail clients is a wider term than consumers and in most cases, small and medium-sized enterprises (SME’s) would be in scope. The proposals extend to firms that manufacture or supply products and services to retail clients, even if they do not have a direct relationship with the end customer.

3. Three elements

• The consumer principle- The options proposed are; Option 1- A firm must act to deliver good outcomes for retail clients. Option 2- A firm must act in the best interests of retail clients. 

• The cross-cutting rules- A firm must act in good faith, take all reasonable steps to avoid foreseeable harm to consumers and take all reasonable steps to enable consumers to pursue their financial objectives. 

• The four outcomes- detailed expectations about communications, products and services, customer service and price and value.

4. Private right to action

Section 138D of the Financial Services and Markets Act 2000 allows the FCA to determine, for each rule, if people have a right of action for damages for loss caused by a breach of that rule (subject to some limited exceptions). This right applies to most rules but doesn’t currently apply for breaches of the principles. The FCA is not making any specific proposals at this stage, but have set out the arguments made for and against.

5. Many proposals build on existing rules and principles 

Two relevant principles are; 

6- A firm must pay due regard to the interests of its customers and treat them fairly principle 

7- A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.

6. Practical thoughts 

Now is a good time to review your product governance, product approval and product lifecycle processes to make sure they're up to date with current FCA requirements. Within the next few months, I’d recommend doing a gap analysis exercise, to give you an overview of the impact and implementation time of the proposed changes. This will help you maintain compliance today and set you up to move fast while staying in control in the future. If you'd like support to understand how the new consumer duty could impact you, contact me at frances@turtlelaw.com, I’d love to chat!