Consumer Duty

The FCA’s Consumer Duty sets clearer and higher expectations for firms’ standards of care towards consumers.  The FCA aims to ensure firms consistently focus on consumer outcomes, and put customers in a position where they can act and make decisions based on their own needs and interests.

The Consumer Duty requires firms to:

• Put themselves in the customer’s shoes and ask ‘would I recommend my firm’s products and services to my friends and family?’
• act to enable rather than hinder these outcomes
• assess the effectiveness of their actions

Why introduce a new Consumer Duty?

The FCA has seen, across various markets, that consumers don’t always get the products and services that meet their needs, or outcomes they might reasonably expect.  The FCA highlights these key factors:

• Weaker bargaining position – such as where the customer is in a market or environment where they are unable to negotiate – particularly in less competitive markets.
• Asymmetries of information – where the customer has less information about products and services than the sales person and this is used to exploit the customer.
• Behavioural biases and ‘sludge practices’– where a customer’s behaviour is taken advantage of, particularly if they are vulnerable.  Sludge practices are those that hinder consumers from making decisions that are in their interests, for example; where information is deliberately withheld about their rights under a finance agreement.