Consumer duty applies to older ‘off-sale’ financial products from Wednesday
From July 31 2024, the duty applies to older products that were sold before July 31 2023 and have not been marketed or sold to new customers since.
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Your support makes all the difference.The next phase of a duty which puts obligations on financial firms to improve consumer protection standards gets under way from Wednesday.
The date also marks a year since the consumer duty was launched by the Financial Conduct Authority (FCA) for new and existing products and services that are open for sale or renewal.
From Wednesday, the duty is also in force for closed products and services.
These are older products that were sold before July 31 2023 and have not been marketed or sold to new customers since.
The FCA gave firms an extra year to get to grips with the complexity of older systems and the increased work involved.
Graeme Reynolds, director of competition at the FCA, told the PA news agency: “The consumer duty is there to set high standards of consumer protection in financial services. It’s about firms focusing on delivering good consumer outcomes.
“It very much means consumers should be receiving clear communications they can understand, products and services that meet their needs and offer fair value and that they get the customer support they need, when they need it.
“And July 31 marks a key milestone for us in the consumer duty journey.”
Having launched on July 31 2023, the consumer duty requires firms to put their customers’ needs first, with timely communications and products and services that work as expected.
Firms should also be able to explain and justify pricing decisions, including being able to show that rates offer fair value.
The duty also aims to support vulnerable customers. Companies should be taking into consideration how they adapt their communications to meet the needs of customers with characteristics of vulnerability.
Firms may, for example, need to make sure there is effective access for those who do not go online regularly.
It is hoped that, over time, the duty will improve trust and confidence in financial services.
The existence of the duty does not mean that people should not shop around. It is hoped that the duty will help to arm consumers with information that could make shopping around easier.
Mr Reynolds said the duty is particularly important “as people deal with the increased cost of living”.
He said: “We’re going to be closely monitoring how firms are complying with the duty, we will of course be acting swiftly and assertively where they aren’t.
“And our message very much to consumers is: If you’re unhappy with any aspect of your financial services, of course complain to your provider and if you’re not happy with the response you get then the Financial Ombudsman Service is there as well to deal with any of those concerns.”
He said the consumer duty “is very much an important part of our regulatory toolkit”.
We've seen a number of firms really improve the way they capture and record information about customer vulnerabilities
Asked about the impacts of the consumer duty, Mr Reynolds said: “I think we’ve seen significant progress over the last year in terms of the benefits that (the duty) is bringing for consumers.
“We’ve really seen firms focusing on removing those ‘sludge’ practices. So those are those practices which make it much more difficult for customers to act in their own interest.
“For example, we’ve seen firms enable customers to exist products through a wider range of channels, not dependent on how they took that product or service out, when they originally did so.”
He said firms had also focused on redesigning “customer journeys”, for example, being clear on what is included or excluded in current account products and adding prompts and push notifications.
He added: “We’ve seen a number of firms really improve the way they capture and record information about customer vulnerabilities.
“I think one of the best examples I’ve seen is firms adopting this ‘tell us once’ approach, so customers don’t need to keep flagging their vulnerabilities and customer support staff are already understanding what needs to be done because they can see a flag on their customer’s account.”
The FCA has also seen savings providers acting quickly to pass on rises in interest rates to customers, he added.
Speaking in February, Sheldon Mills, executive director, consumers and competition at the FCA, said: “Many firms have already made great progress on the duty – for example, they are offering the right products and services to the right customers, eradicating jargon and moving clients to less bespoke and cheaper options where that is a better fit.
“We have seen board-level leaders giving serious consideration to what the duty means for them culturally and operationally. Separately, we have seen some firms offering fairer value too, by increasing value received by savers, reducing fees, and maximising benefits to customers.”
But Mr Mills said the regulator had also identified room for improvement.
He said previously: “We do not want to see firms waiting to see if we will intervene to address an issue.
“Firms also need to get serious about their data and not assume they can just re-package existing information. And we want to see the duty embedded across every firm at every level, with leadership from boards.”