A financial services consumer duty

Striking a delicate balance

The financial services industry is a complex ecosystem.

There are numerous products and services on offer to a variety of retail consumers each with their own individual requirements. This activity takes place around an intricate reef of financial services firms, infrastructure and regulation.

Interventions sometimes are necessary, but they do affect the ecological balance – sometimes in unforeseen ways.

The FCA is moving forward with proposals to impose a consumer duty on firms dealing with retail consumers. It is looking to secure a “paradigm shift” towards more outcomes-focused regulation.

This may have far-reaching implications for consumers and firms – even those without a direct end-relationship with consumers.

Our London Financial Regulation and Contentious Regulation teams can help you to navigate these shifting waters.

Which way is the tide going?

An overarching Consumer Principle

There are two potential formulations – based on:

  • delivering “good outcomes” for retail clients; or
  • acting in retail clients “best interest”.

Cross-cutting rules

These would require firms to take all reasonable steps to:

  • Avoid causing foreseeable harm; and
  • Enable customers to pursue their financial objectives;
and to act in good faith.

Outcomes

  • Communications that enable consumers to make informed decisions.
  • Products and services designed to meet customers’ needs and sold to those customers.
  • Customer service meeting customers’ needs.
  • Price of products and services that represents fair value.

In microcosm

Consumer Duty

Dispute resolution partner Alison Wilson and financial regulation counsel Sara Cody discuss the FCA's recent consultation on the introduction of a "consumer duty" in financial services. We give an overview of the proposals and consider their key aspects, and give some thought to the practical implications for firms.

View our infographic on the proposals >

View our infographic on the key considerations for Asset Managers >

View our note on the implications for payments and e-money firms >

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Consumer Redress

In this podcast episode we review the various mechanisms for consumers to obtain redress from financial services firms. We assess how the FCA’s proposal to extend the private right of action to cover Principle breaches (including any new Consumer Principle) might fit within the current framework. Crucially, will this achieve the FCA’s aim of securing a higher level of protection to consumers?

This episode features Lara Adamson (Associate, Dispute Resolution, London), Tom Rudrum (Associate, Dispute Resolution, London).

View our infographic outlining the current redress framework >

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