27 July 2022

Retailers have been given an extra three months to implement the FCA’s new Consumer Duty to allow them to “fundamentally improve” how they sell finance to consumers.

The new Consumer Duty guidance from the FCA, to be issued at 7am this morning (27 July) will concentrates on “good outcomes” rather than giving specific legislation.

While the new Consumer Duty focuses on ‘good outcomes’ for consumers, the FCA acknowledges that a good outcome isn’t easy to understand. But it places the onus on finance providers and brokers to implement tests and measures that will monitor outcomes for customers, and to act where they see problems.

The FCA expects the new Consumer Duty to have full focus at board level, and for there to be a champion on the board. It also requires companies to produce annual reports on their activities. These won’t have to be published publicly, but must be available for the FCA to review on request.

Due to the extent of the changes under the new Consumer Duty the FCA has extended the implementation period from nine months to 12 for new and existing products and services, giving businesses a deadline of 31 July 2023. At the same time, firms have been given a further 12 months, until 31 July 2024, to apply the Duty to products and services held in closed books.

The FCA accepted from the feedback given to its consultation document that an overly short period could increase either operational or execution risks, or the risk of unintended consequences if firms withdrew certain products or services.

While the FCA is keen to implement the new Consumer Duty as soon as possible, it recognises that this is a big change for the industry. FCA executive director of consumers and competition, Sheldon Mills, said: “Firms need time, but customers need good outcomes. Our judgement is that extending the implementation timespan from nine months to 12 is sensible.”

An FCA spokesman added: “The FCA has confirmed its plans to bring in a new Consumer Duty, which will fundamentally improve how firms serve consumers. It will set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first.

“The Duty is made up of an overarching principle and new rules firms will have to follow. It will mean that consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.

“Clarity on the FCA’s expectations and firms focusing on what their customers need should lead to more flexibility for firms to compete and innovate in the interests of consumers.”

Tags: Car Finance, consumer duty, FCA, finance