A new Consumer Duty – setting a higher standard of care for consumers

Date published: 8 August 2022 Blog

Simon Rawle

Ombudsman Leader

The Financial Conduct Authority (FCA) is introducing a new Consumer Duty that will give consumers a higher level of protection and ensure that firms focus on consumer needs.

In this blog, Ombudsman Leader, Simon Rawle, outlines the new Duty and how the Financial Ombudsman Service is working with the regulator and stakeholders during its implementation.

The FCA has published its final rules and guidance for a new Consumer Duty. The Duty is made up of an overarching principle and rules that firms will have to follow. It sets higher and clearer standards of consumer protection across financial services. It also sets expectations that can work with new products or ways of working as business models change or develop and it better protects consumers from current or emerging drivers of harm.

We welcome the publication of the new Consumer Duty and the expectations it sets for the standard of care that financial services firms give consumers.

The new Consumer Duty

The new Consumer Duty is made of up of the following component parts:  

  • A Consumer Principle which reflects the overall standard of behaviour expected from firms
  • A set of ‘cross-cutting rules’ which develop the expectations for behaviour through three overarching requirements that explain how firms should act to deliver good outcomes and apply across all areas of firm conduct and which inform and help firms interpret the four outcomes
  • The ‘four outcomes’ are a suite of rules and guidance setting more detailed expectations for firm conduct in four areas that represent key elements of the firm-consumer relationship (the governance of products and services, price and value, consumer understanding, and consumer support) 

The FCA sets out its expectations of firms under the Duty in full in its published final guidance.

The new Consumer Duty will not apply to past business

The Duty does not have a retrospective effect and will not apply to past actions by firms. The FCA and the Financial Ombudsman agree that firms’ conduct should be judged against the rules and standards that were in place at the time.

The Financial Ombudsman Service’s work often involves assessing complaints against the standards at the time of the event complained about, we do not apply today’s standards to yesterday’s events. Our work and decisions always involve the assessment of what we believe is fair and reasonable in the circumstances of each individual case, considering what happened against the law, rules, codes, and good practice that applied at the time.

Find out more about our powers and How we make decisions.

Working together to help financial businesses understand the new Consumer Duty

Some stakeholders are concerned that outcomes-based regulation may lead to inconsistent interpretation of the new Duty by FCA and the Financial Ombudsman Service.

We are already working closely with the regulator, in particular through the Wider Implications Framework, to ensure a consistent and complementary approach to the application of the new Consumer Duty – whilst respecting the different statutory roles we deliver – to give clarity and greater certainty to stakeholders and to respond to their concerns.

During the implementation period we will be sharing feedback and working to align our approach. Once the Duty is in force as part of the wider system of rules and guidance, where complaints we see have any potential wider implications the Financial Ombudsman will share issues identified through its casework and the FCA will ensure the Financial Ombudsman is aware of its expectations for firms.

We have also engaged directly with businesses, trade bodies and other stakeholders to hear views and concerns regarding the introduction of the Duty. For example, I spoke at the ABI’s Conduct Regulation online event in May about our work to prepare for the implementation of the Duty, and reassured delegates that we will continue to assess cases against the rules and standards that applied at the time. We will continue to discuss with industry stakeholders and to share information about our role and our approach.

Sharing our information and experiences

One of our strategic aims is to ensure that we share our insight with financial businesses and with the wider financial services ecosystem to improve financial services, to help enable the effective resolution of issues, and prevent unfairness to consumers.

We regularly publish our insight and our approach to case-handling and complaints on our website. This includes final decisions in specific cases, and case studies, to help firms understand our thinking and approach to resolving the cases we see.

As complaints are made to us, where the Duty applies, we will share information about our approach through online case study examples and by adding updated guidance for financial businesses so that stakeholders can learn from our experience.