Over the summer of 2021 the FCA consulted on a set of proposals to create a new Consumer Duty that the regulator plans to introduce in July 2022. This will require that firms:
- ask themselves what outcomes consumers should be able to expect from their products and services
- act to enable rather than hinder these outcomes
- assess the effectiveness of their actions
The regulator wants to see firms setting clearer and higher standards by putting themselves in their customers’ shoes, asking themselves questions such as ‘would I be happy to be treated in the way my firm treats its customers?’, or ‘would I recommend my firm’s products and services to my friends and family?’ This is in response to a series of harms the regulator has identified across a range of financial services sectors since 2014.
What will this mean for dealers and brokers?
If your firm is already following the FCA's rules, Principles for Business and Treating Customers Fairly then it is likely you are meeting the FCA's expectations under a new Consumer Duty. It was reassuring to see that within the FCA's consultation there was no case studies of motor retailers performing 'sludge practices', seen in other sectors, where customers are deliberately misled to their detriment. The processes that lenders, retailers and brokers have implemented are generally already achieving good outcomes for customers. But the FCA wants firms to focus on 4 new outcomes:
- Communications - ensuring the customer receives all the information they need and understands it
- Products and services - making sure these are fit for purpose and and ensuring the finance product meets the way the customer intends to use the vehicle
- Customer service - the bread and butter of dealerships and brokerages
- Price and value - driving the best deal for the customer
The FCA will also be introducing a new Consumer Principle that will form part of PRIN which will 'set a clear tone and uses language that reflects the overall standards of behaviour we expect from firms' as well as cross-cutting rules.
The FCA will be issuing a second consultation by the end of 2021 and will then set out drafting the new rules and Principle it plans to introduce before it introduces the new Consumer Duty in July 2022. We will of course be updating our Regulatory Knowledge training material to ensure it covers the changes.