FCA ready to act on Consumer Duty as measures begin

The Financial Conduct Authority (FCA) says that it prepared to take action against firms failing to comply with a new duty to justify charges to customers.

The rules cover all financial products and services and mean that firms must deliver good outcomes for customers.  The regulator has since set out a 14-point plan to ensure banks appropriately pass on interest rate rises to customers and communicate clearly on savings deals.

The FCA says that the Duty sets higher standards of consumer protection meaning that lenders should give support to consumers when needed, provide communications that consumers understand and that they must all offer products and services that meet need to offer fair value.

Firms could be asked to adjust prices or change products if fees or charges. The FCA hopes the Consumer Duty will improve trust in financial services and prevent mis-selling scandals. The FCA estimates that implementing the duty will cost firms £2.4 billion and is spending £5.3 million on embedding it. The next step for firms will be strategic revaluations, potentially leading to some leaving the market.

The new rules apply to all new and existing products and services that are currently on sale. For older products that are no longer on sale, the rules will apply from 31st July 2024.

Commenting on the launch Neil Kadagathur, Co-Founder and CEO of Creditspring, said “The Bank of England’s figures shed a hugely concerning light on the state of the UK’s household finances and highlight the risk of a future debt crisis if people are forced to keep borrowing to survive.”

“Almost one in five households are reliant on their savings to pay bills – but with rapidly dwindling savings pots, what happens when these run out? Millions of people will be forced to borrow to get by in the next six months and younger people are likely to be hardest hit  – our research shows that three in ten 25-34 year olds have no option but to rely on credit.”

“If households are going to be more reliant on credit then lenders must become more transparent around fees, offering more affordable products to meet the rising demand. The FCA’s Consumer Duty is much-needed and will help to improve outcomes for borrowers but the industry will need to go above and beyond in order to step up its support for borrowers in this challenging period.”