What is the New Consumer Duty?

The new consumer duty published by the Financial Conduct Authority (FCA) is a set of rules and guidelines aimed at improving consumer outcomes in the financial services industry. It emphasises the importance of putting customers' interests first and ensuring that they are treated fairly throughout their interactions with financial firms.

The consumer duty is important because it addresses some key issues within the industry. It aims to enhance competition, promote innovation, and foster trust between firms and their customers. By setting clear expectations and standards for firms to follow, the FCA seeks to create a more transparent and accountable financial services sector.

The consumer duty consists of three main elements:

1. Acting in the best interest of customers: Firms are required to act in the best interest of their customers, meaning they must prioritise the customer's needs and provide suitable products and services.

2. Taking reasonable steps to avoid harm: Firms must take proactive measures to identify and mitigate any potential harm to customers. This includes providing clear and transparent information, avoiding misleading communication, and addressing any conflicts of interest.

3. Encouraging customers to take positive action: Firms should take steps to enable customers to make informed decisions and engage with their finances. This can be done through clear communication, providing appropriate tools and resources, and offering support throughout the customer journey.

Overall, the new consumer duty aims to create a fairer and more customer-centric financial services industry. It seeks to ensure that consumers are treated fairly, have access to suitable products and services, and are empowered to make informed financial decisions. By promoting trust and accountability, the FCA hopes to improve consumer outcomes and drive positive change in the industry.