FCA to introduce new Consumer Duty for brokers

A NEW level of consumer protection is being proposed by the FCA for regulated leasing brokers.

Although brokers are already guided by FCA rules around treating customers fairly, the FCA says the new Consumer Duty will provide further defence against poor customer outcomes.

The FCA says it wants Consumer Duty to “drive a shift in culture and behaviour for firms, meaning that consumers always get products and services that are fit for purpose”. The FCA says that these should represent fair value and that the terms of the products are clearly communicated and understandable.

The package of measures we are proposing will enhance our existing rules and is designed to tackle the harms we see in financial services markets, and their causes, as well as put consumers in a stronger position to make good decisions.

Sheldon Mills, executive director of consumers and competition, FCA

What does the Consumer Duty entail?

The FCA says there are three key elements:

• The Consumer Principle, which will reflect the overall standards of behaviour the FCA expects from firms. The wording being consulted on is: ‘a firm must act in the best interests of retail clients’ or ‘a firm must act to deliver good outcomes for retail clients’.
• Cross-cutting rules which would require three key behaviours from firms, which include taking all reasonable steps to avoid foreseeable harm to customers, taking all reasonable steps to enable customers to pursue their financial objectives and to act in good faith.
• It will also be underpinned by a suite of rules and guidance that set more detailed expectations for firm conduct in relation to four specific outcomes – communications, products and services, customer service and price and value.

The FCA is currently consulting on the proposed changes until 31 July 2021. You can see the consultation and respond here.

The FCA says it expects new Consumer Duty laws to effective by end July 2022 following further consultation end 2021.