Raising the bar for consumer protection

John Hardman looks at the FCA’s ‘Principle 12’ – the new Consumer Duty – and how it gives consumers more protection.

Raising the bar for consumer protection

There’s no doubt that the FCA’s new ‘Principle 12’ on Consumer Duty will fundamentally reshape financial services in the UK. The Duty, which aims to place achieving good customer outcomes more explicitly at the heart of financial services, represents a completely different viewpoint on how to treat customers fairly.  

In short, the new principle requires firms within the financial sector to act in good faith, avoid causing foreseeable harm and enable support for customers to pursue their financial objectives.  

Now, less than 150 days from the implementation deadline of 31st July 2023, brokers, lenders, conveyancers, estate agents and various other parties involved in the home buying process, should be well advanced in their preparations to ensure they are ready.  

To help firms in framing the implementation of the new Consumer Duty, the FCA have provided a framework of outcomes. These can be broadly summarised as:  

1.Price and value – the price and fee paid is reasonable  

2.Product & Services – the product or service is fit for purpose  

3.Consumer Support – clear & concise information is provided at the right time  

4.Consumer Understanding – the customer is well equipped to make an informed financial decision  

As businesses gauge how they’re meeting these objectives, the FCA – which is aiming to become a more assertive and data-led regulator – will be able to swiftly spot practices that don’t benefit consumers.  

Firms need to be able demonstrate, if asked, that they have understood the new regulation and that the step change to more robust standards of consumer care at all stages of the product lifecycle are in place. While implementation plans will understandably vary from firm to firm based on the products and services they offer, the FCA is ultimately looking for evidence that directors and senior management have appropriately scrutinised and challenged all plans.  

While the impact of the regulator’s new thinking is wide ranging and substantial, I believe, with customers’ best interests at its very core- this can only be a good thing. Not only will the new Consumer Duty raise the bar for standards of consumer protection, it could, for example, lead to more stringent requirements for lenders to disclose the terms and conditions of their loans. This could lead to greater transparency and help borrowers make more informed decisions about whether a bridging loan is the best borrowing solution and should promote competition and growth based on high standards.  

Here at Fluent, we’re pressing ahead with our implementation plan and preparing to embed the Duty throughout our business. In doing so, we’ve considered some important measures. These includes reviews of existing policies, procedures, fee structure, products, services and the management information needed to meet the new standards; and of course, the ongoing adherence to these standards.  

Moving firms within the Fluent group into a ‘Consumer Duty world’ has been one of those tasks we have relished as an organisation.  

It would be easy for industry commentators and practitioners to (wrongly in my view) pay ‘lip service’ to this new principle, but that would be selling the new Consumer Duty short.  

Almost every aspect of our operations here at Fluent have had to be re-assessed, thinking has been freshly challenged and established practises re-considered. Even leaving aside the new principle, there has been a substantial benefit from undertaking these exercises as we have sought to improve, re-align and sharpen our focus on areas that have been overlooked or in need of a refresh.  

Beyond the implementation deadline, we will continue to refine and review our Consumer Duty framework and strengthen our proposition as a customer-centric broker.  

Naturally, the vast majority of us already deliver outstanding levels of customer service and these new measures will hold no fear; but we will need to be able to demonstrate that these standards are embedded within our business at every level of seniority and remain constantly under review.  

A hop, skip and a jump through spring, and the FCA’s Consumer Duty will be upon us. As the cornerstone of the FCA’s three-year strategy of focussing on results, rather than being driven by processes, we can expect more regulation to come. Put simply, this is the start, rather than the end – and it’s almost inevitable that every firm is going to have to make some refinement to what they do along the way.  

For more information about Fluent’s wide range of financial products, please visit fluentmoney.co.uk