The Financial Conduct Authority (FCA) announced that on the 31st of July this year they are enforcing a new consumer duty in order to create more transparent markets and allow consumers to be put first in the financial market. This is yet another step from regulators to create a better market for individuals by enhancing consumer protection and ensuring financial firms prioritise their consumer’s interests.
The scope of the Consumer Duty extends to all financial products and services provided to clients and has been in discussion for around 5 years in and around the FCA. The regulations aim is to complement the existing consumer protection legislation and deliver good financial outcomes for customers and ideally stop asymmetric information by supplying a level, transparent playing field.
Many financial organisations may argue they already have their customers best interest at heart; sadly, however this is not the case across the board with frequent financial scandals. According to a survey, conducted by the Financial Services Compensation Scheme, only 25% of the UK consumers trust our financial services and 31% said they outright distrust it. Therefore, the FCA are taking these steps in an attempt to restore this trust and build consumer confidence in these uncertain times.
So, what actually are the changes?
Well, the regulator has outlined four desired outcomes for firms and held the firms themselves responsible for the implementation of these. The four outcomes relate to: products and services, price and value, consumer understanding, and consumer support. The rules require firms to consider the customer throughout the whole process of their financial journey including consumers with vulnerability and ensuring they are not taken advantage of, rather supported, and guided by firms. One simple advantage is that all kinds of financial information should be much easier to understand so that people are not drowned in confusing terms.
Although this seems very positive for the market it could have a negative knock on for consumers. The FCA estimate the consumer duty will cost the sector £2.4bn and this loss to the firms could be reflected in their prices and rates. Therefore, the effect of the crack down regulation may not be all positive. However, this cost is a one off to the firms and will set them up for a better future in a much fairer market.
So, the result of all of this should be positive for the consumer, and In the coming weeks you may begin to notice a change in the service behaviour of these financial companies. Whether it’s increased support or maybe some understandable terms rather than the usual foreign finance lingo we should see a positive change.
Here at Excel-a-rate Business Services we fully intend to comply with these new regulations in order to provide our current and future customers with the easiest and best path for their business. We work with and support our clients to guide them to a better future.