What is The Consumer Duty?

All employees in the Financial Services sector must now be aware of the FCA’s updated standards for consumer protection - known as “The Consumer Duty” - and how to comply with its regulations.

Customer support agent in Financial Services
All employees in the financial services sector must now be aware of The Consumer Duty

The Consumer Duty is a regulatory framework that establishes the level of care that businesses in retail financial markets should provide to clients. It's designed to help maintain consumer confidence in financial products and services, by helping them understand their financial credit agreement in plain language, and then decide whether or not to enter into the agreement.

The Consumer Duty is being introduced by the FCA to improve the way financial services firms communicate with consumers and will apply to all businesses that offer financial products and services to consumers.

 



What is the purpose of The Consumer Duty?

The Consumer Duty is being introduced to improve the way in which financial services firms communicate with consumers. The regulation will help to ensure that consumers are provided with clear and concise information about their financial credit agreement, in order to make an informed decision about whether to enter into the agreement.

The Consumer Duty will also help to ensure that financial services firms take account of the needs of consumers when designing and delivering their financial products and services.


What are the requirements of The Consumer Duty?

Under The Consumer Duty, financial services firms must take account of the needs of consumers when designing and delivering their financial products and services. In addition, financial services firms must provide consumers with clear and concise information about their financial credit agreement, in order to help them make an informed decision about whether to enter into the agreement.



The information that must be provided to consumers includes:


  • ​The key features of the financial product or service

  • ​The risks and benefits of the financial product or service

  • ​The costs of the financial product or service

  • ​The nature and extent of the consumer’s commitment

  • ​The consequences of default

  • ​The cooling-off period

  • ​The right to withdraw from the agreement

How will The Consumer Duty be enforced?

The FCA will have the power to impose financial penalties on financial services firms that breach the consumer duty. In addition, the FCA will have the power to issue directions to financial services firms that breach the consumer duty, in order to require the firm to take steps to comply with the regulation.


Who will The Consumer Duty apply to?

The consumer duty will apply to all financial services firms that offer financial products and services to consumers.


All financial services companies must adhere to The Consumer Duty

What are the elements that make up The Consumer Duty?

The Consumer Duty consists of the following elements:

  • A consumer principle This principle encapsulates the general level of conduct that is expected from businesses and further defined by the other components of The Consumer Duty.

  • The "cross-cutting rules" These are three overarching standards that explain how firms should behave in order to generate good results and apply across all aspects of corporate activity as well as providing context for the “four outcomes”.


  • The four “outcomes” These four pillars in The Consumer Duty are a collection of guidelines and standards outlining more specific expectations for business behaviour in four areas that refine key aspects of the business-consumer relationship:

  1. The governance of products and services

  2. Price and value

  3. Consumer understanding

  4. Consumer support

Kernel Content Studios works with financial services businesses to deliver personalised video content and explainers that focus on the Consumer Understanding outcome.