The Financial Conduct Authority has shifted its expectations of finance firms and dealers from the old “treating customers fairly” principle to now an adage of “put their customers’ needs first”.
The shift comes as the FCA today launched a new Consumer Duty “which will fundamentally improve how firms serve customers” as the financial watchdog continues a transformation to become “a more assertive and data-led regulator”.
The Consumer Duty is made up of an overarching principle and new rules firms will have to follow.
The FCA said 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.
It also wants to ensure products and services are sold at a fair price that reflects their value.
Financial product providers will be expected to make it as easy to switch or cancel products as it was to take them out in the first place, amid a ‘Consumer Principle’ that “a firm must act to deliver good outcomes for retail customers”.
Sheldon Mills (pictured), executive director of consumers and competition at the FCA, said: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions.
“The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards.
“As the duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”
Regulated firms, which include captive and independent finance houses plus car dealers which offer motor finance to consumers, are being given 12 months to implement the new rules for all new and existing products and services currently on sale.
In 24 months the rules will apply to closed book products, that are no longer on sale, to ensure fairer conditions for consumers still paying for these products.
In May the FCA warned dealers and other brokers against using misleading terms in their advertising, such as “pre-approved”, that make borrowing look easier or less risky than it should be.