The Duty aims to ensure a greater level of consumer protection within the retail financial markets and higher expectations for the standard of care that firms provide to consumers. It applies to all FCA regulated, exempt and ancillary activities on, in or from the UK, where the end client is a retail client, SME or small charity, including our authorised electronic money and payment services.
Unregulated activities are not in scope of the Consumer Duty.
The Duty is comprised of 3 key elements:
1. The Consumer Principle
Principle 12 – Firms ‘must act to deliver good outcomes for retail clients’
This new principle, which will be added to the FCA Handbook, reflects the FCA’s expectation that firms should ‘consistently focus on consumer outcomes and put consumers in a position where they can act and make decisions in their own interests’. Firms should aim to identify where good outcomes are not being achieved and take the appropriate action to address this.
2. Cross-cutting Rules
The rules outline three key behaviours expected from firms:
3. The Four Outcomes:
The outcomes represent key elements of the firm-consumer relationship and are the main focus in delivering good outcomes for consumers. They provide more detail into the conduct expected of firms within these four areas:
How Consumer Duty affects firms across the four outcomes
Products and Services
Products and services must specifically be designed to meet the needs of consumers and sold to those whose needs they meet. The requirements of manufacturers and distributors are specific to their role in the distribution chain.
Manufacturers are described by the FCA as firms who create, develop, design, issue, manage, operate, carry out or underwrite a product or service.
Distributors are firms that offer, sell, recommend, advise on, propose or provide a product or service.
The table below provides an overview of responsibilities relating to both manufacturers and distributors:
Price and Value
This outcome reflects the FCA’s expectation that the price of products and services offered by firms, should represent fair value for all consumers. Fair value is defined as when the amount paid for the product is reasonable, relative to the benefits of the product. However, fair value goes beyond the price paid, as it aims to mitigate unsuitable features of a product that can lead to foreseeable harm or tackle features that are unfair or can result in poor value.
Communications should equip consumers to make effective, timely and properly informed decisions about financial products and services. Consumers can only be expected to take responsibility where firms’ communications enable them to understand their products, services, features and risks and the implications of their decisions. Firms are expected to support consumers in making informed decisions.
This outcome builds on the Consumer Principle 7: firms should communicate in a way which is clear, fair and not misleading.
This is relevant to all firms involved in the production, approval and distribution of consumer communications.
This outcome expects the service provided to consumers to meet their needs, enable them to realise the benefits of products and services and act in their own interests without unreasonable barriers. Consumers should be supported in an adequate and effective manner throughout the lifecycle of a product or service.
The Consumer Understanding and Consumer Support outcomes should be at the forefront of all interactions with consumers.
This is relevant to all firms who interact directly with or support retail customers regardless of the channel used.
How does this impact ISX Financial UK Ltd (ISXUK)
The Treating Customers Fairly (TCF) framework is comfortably embedded in ISXUK’s culture and is consistently utilised to ensure our customers receive fair treatment and are satisfied with their experience.
The Duty goes a step further than the TCF framework as it focuses on the process and the impact of a firm’s actions on consumer outcomes.
To ensure compliance with the expectations under The Duty, ISXUK is currently undertaking a review of our products and services, and the value they offer, along with a review of our customer journey to ensure we are providing the necessary support to our customers. This will enable us to determine our position against the rules and make necessary changes where required.
We want to continue putting the interests of our customers at the heart of our culture and purpose.
Timeline to implement Consumer Duty:
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