The FCA is to consult on introducing a sweeping new Consumer Duty which will require firms to do more to protect consumers from harm and bad financial decisions.
If the plans go ahead, firms will also be required to do everything possible to avoid "consumer harm" at every step of the customer relationship.
The regulator say that its new plans, contained in CP21/36 published today, will ensure a “higher and more consistent standard of consumer protection” for users of financial services.
The FCA wants its new duty to protect customers to help to stop harm before it happens. The new duty is designed to “fundamentally shift” the mindset of firms, the watchdog says.
The FCA says at present too often consumers do not get the benefits or value they should expect from products or services and don't get the information or help they need, when they need it.
The new duties will require firms to:
• Always put good consumer outcomes at the centre of their businesses
• Focus on the diverse needs of their customers at every stage so that consumers can make good financial decisions and have greater trust in firms
Previous regulatory actions have highlighted poor practices by firms that cause consumer harm. These include firms presenting information in a way that exploits consumers’ behavioural biases, selling products or services that are not fit for purpose or providing poor customer support, the FCA says.
The new consultation takes on board feedback from industry and consumer groups following proposals published in May. It sets out more developed proposals for new rules to tackle the causes of harmful practices.
Under the new duty firms will have to provide consumers with information they can understand, offer products and service that are fit for purpose and provide helpful customer service.
The FCA says it will use assertive supervision and its new data-led approach to intervene quickly when it identifies practices which do not deliver for consumers.
Alongside the consultation, the FCA has published draft guidance to help firms prepare for the introduction of the new duty.
The consultation is open until 15 February and the FCA expects to confirm any final rules by the end of July.
Parliament has also called for a change to the standard of protection for consumers.
Sheldon Mills, executive director of consumers and competition at the FCA, said: "Making good financial decisions is vital to financial well-being and trust, but too often consumers are not given the information they need to make good decisions and are sold products or services that do not offer the benefits they might expect. We want to change that.
“We’ve been working to set a higher standard for firms, to put more of the onus on them to act in their customers’ interests and get their products and services right.
"The new duty will drive a change in culture at firms. We expect firms to step up and put consumers at the heart of what they do and we’ll be holding senior managers accountable if they do not.”
• CP21/36: A new Consumer Duty: Feedback to CP21/13 and further consultation
• This is a developing story. Please check back for updates.