In two sentences, what is the FCA's Consumer Duty?
9 September 2023
In two sentences, what is the FCA's Consumer Duty?
The FCA's Consumer Duty isn't simply an 'extension' of what was originally the FSA's 'Treating Customers Fairly' of 17 years ago, it's much more than that. The Consumer Duty is a significant shift in the FCA's expectations of firms and requires them to act to deliver 'good outcomes' for their customers rather than just create 'a fair environment' - and that's quite different.
Firms must act in good faith towards customers, avoid causing them foreseeable harm, and enable and support them to pursue their financial objectives. Firms should consider the diverse needs of their customers - including those with characteristics of vulnerability. The topic of vulnerability has been a hot one in the consumer debt sector, with the spotlight particularly on Individual Voluntary Arrangements (IVAs) in recent years.
Translating the technical speak into human… What it all means in practice
Take IVA proposals as an example: FCA regulated firms need to be able to demonstrate they have properly considered each IVA proposal and that they have voted for or against the proposal, ensuring the right outcome for the customer.
In the words of the FCA: “Data and KPIs should be used to evidence outcomes for consumers at all stages of the customer journey and product lifecycle. Poor data will impede the ability to undertake robust assessments and evidence outcomes. Thinking carefully about data capabilities and where technology can be leveraged to improve consumer insight is critical.”
At Trustfolio, we believe that even if the Consumer Duty doesn't directly apply to you, everyone has a duty to ensure consumers receive the best outcome. Delivering the best outcome for the consumer should be the best outcome for all stakeholders in the process. If a consumer cannot afford to maintain a payment arrangement, then that's an awful outcome for them, but also an awful outcome for everyone connected to the consumer!
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