The FCA’s Sheldon Mills says too many firms aren’t considering their customers’ needs when designing and selling products
This week, City regulator the Financial Conduct Authority announced its new Consumer Duty – a set of rules which it says will force companies to provide a better and fairer service to customers.
Sheldon Mills, executive director of consumers and competition at the Financial Conduct Authority, explains why he believes it will improve customer support, cut call centre waiting times and end ‘rip off’ fees.
For all of us, making good financial decisions is critical to building better futures for ourselves and our families.
This could be to save for retirement or a summer holiday, borrow to manage short term spending needs or to buy a home, or insure against the unexpected.
But we know that making sound financial decisions isn’t always easy, and, in some ways, it’s getting harder.
Household budgets are under considerable strain as inflation and bills rise.
And, while digital services have made things easier and more efficient, some people do find it more difficult to navigate the digital landscape and can become more vulnerable to scams and fraud.
We have a world-leading financial services sector here in the UK. But currently, too many firms aren’t fully considering what their customers actually need when designing and distributing their products, services or support.
At the FCA, we regulate around 50,000 financial services firms and we want to make sure that all the firms we regulate put their customers’ needs first, so they can make good financial decisions with their hard-earned money.
Selling suitable products at a fair price, providing good standards of customer support and communications people can understand shouldn’t be controversial
That’s why we’re introducing a new Consumer Duty, which will set higher and clearer standards of consumer protection across financial services and get firms in the sector to focus on delivering good consumer outcomes.
Selling suitable products at a fair price, providing good standards of customer support and communications people can understand – as will be required under the Duty – shouldn’t be controversial.
As financial services firms start implementing the Consumer Duty over the next 12 months on new and existing products, we want them to focus on how they’ll make sure their customers get products and services that are right for them, with no rip off charges and fees.
We want these firms to think about how to make sure their customers can easily switch or cancel products that they no longer need or can afford, as well as how to make it quicker and easier for their customers to get through to them, without unreasonable call waiting times, and to receive a helpful response.
And we want these firms to focus on how they’ll make sure their customer communications are clear and easy to understand, without key information buried in lengthy terms and conditions that few have the time to read.
Higher standards: Mills says that the Consumer Duty should help to stamp out practices such as firms charging higher fees to loyal customers while offering cheap deals to new ones
If financial services firms are getting these things right in the first place and putting their customers at the heart of everything they do, the poor practices we’ve seen across the industry previously, like charging high prices for unarranged overdrafts or paying more for being a loyal customer, shouldn’t happen.
We recognise meeting these new, higher standards will require a significant effort from many firms in the sector. But we think it will have a major impact on the level of protection and support finance customers receive in the UK and we have a parliamentary mandate to take this forward.
The Duty builds on some of our key sector-based interventions of recent years, such as tackling the insurance loyalty penalty or addressing practices that make it hard for people to switch, and levels these up so they apply across the board.
By requiring the firms we regulate to test and demonstrate how they’re delivering good consumer outcomes, the Duty will give us a stronger basis on which to intervene quickly where we see poor practices that don’t benefit consumers.
Prove it: The new rules will require FCA-regulated firms to demonstrate that they are delivering a good service to their customers
Rather than focussing solely on tackling harm after it has happened and worsened, the Duty should help us to prevent some serious problems from happening in the first place.
The Duty will also enable us to tackle new harms as they emerge in a constantly changing industry.
We know many firms providing financial services want to see an innovative, competitive market. These firms should welcome action to tackle competitors who drive down standards.
And, with our data showing that only 35 per cent of people think financial firms are honest and transparent in their dealings with them, if everyone gets on board with the Consumer Duty, we should see greater trust in the sector as a result.