The City watchdog has unveiled its long-awaited Consumer Duty, which aims to improve how regulated firms – including peer-to-peer lending platforms – serve customers.
The Financial Conduct Authority (FCA) said that the new rules will “lead to a major shift in financial services” by setting higher and clearer standards of consumer protection.
The Duty will include requirements for firms to end rip-off charges and fees, make it easier to switch or cancel products, and provide helpful and accessible customer support, not making people wait so long for an answer that they give up.
It also mandates firms to provide more clarity on their products and services, rather than burying key information in lengthy terms and conditions.
The FCA said that clarity on its expectations and firms focusing on what their customers need should lead to more flexibility for firms to compete and innovate in the interests of consumers.
The Duty forms part of the FCA’s transformation to becoming a more assertive and data-led regulator.
“The current economic climate means it’s more important than ever that consumers are able to make good financial decisions,” said Sheldon Mills, executive director of consumers and competition.
“The financial services industry needs to give people the support and information they need and put their customers first.
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“The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards. As the Duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”
The FCA is giving firms 12 months to implement the new rules.
The FCA first unveiled its plans for the Consumer Duty in late 2021, as part of its efforts to boost consumer protections in financial services following a raft of scandals including the collapse of mini-bond provider London Capital & Finance.
Consumer group Which? welcomed the new Duty.
“There are too many instances where the financial services market does not meet consumer needs or provide customers with adequate protection, so we are pleased that the FCA has confirmed that it will introduce a new duty to raise standards and place consumers at the heart of what businesses do,” said Rocio Concha, Which? director of policy and advocacy.
“Strong consumer protections are always needed, but at a time when household budgets are being squeezed by a cost-of-living crisis, they are even more essential.
“The financial industry must get on board with these new protections, and firms that are in a position to do so now shouldn’t wait for them to be formally introduced to deliver positive change for consumers. Where businesses fail to meet the new rules, the FCA must stand ready to impose tough penalties.”