(Alliance News) - The next phase of a duty in the UK which puts obligations on financial firms to improve consumer protection standards gets under way from Wednesday.
The date also marks a year since the consumer duty was launched by the Financial Conduct Authority (FCA) for new and existing products and services that are open for sale or renewal.
From Wednesday, the duty also comes into force for closed products and services.
These are older products that were sold before July 31 2023 and have not been marketed or sold to new customers since.
The FCA gave firms an extra year to get to grips with the complexity of older systems and the increased work involved.
The consumer duty, which launched on July 31 2023, sets higher and clearer standards of consumer protection across financial services, requiring companies to put their customers' needs first.
Firms should provide helpful and responsive customer service and help customers make good decisions through timely communications that are straightforward to understand.
They should also provide products and services that meet consumers' needs and work as expected.
Firms should also be able to explain and justify pricing decisions, including being able to show that rates offer fair value.
The duty also aims to support vulnerable customers. Companies should be taking into consideration how they adapt their communications to meet the needs of customers with characteristics of vulnerability.
Firms may, for example, need to make sure there is effective access for those who do not go online regularly.
It is hoped that, over time, the duty will improve trust and confidence in financial services.
The existence of the duty does not mean that people should not shop around. It is hoped that the duty will help to arm consumers with information that could make shopping around easier.
The FCA has said it has already seen firms making updates to their terms and conditions and their customer communications.
Speaking in February, Sheldon Mills, executive director, consumers & competition at the FCA, said: "Many firms have already made great progress on the duty – for example, they are offering the right products and services to the right customers, eradicating jargon and moving clients to less bespoke and cheaper options where that is a better fit.
"We have seen board-level leaders giving serious consideration to what the duty means for them culturally and operationally. Separately, we have seen some firms offering fairer value too, by increasing value received by savers, reducing fees, and maximising benefits to customers."
But he said the regulator has also identified "there is still much room for improvement".
He said: "We do not want to see firms waiting to see if we will intervene to address an issue.
"Firms also need to get serious about their data and not assume they can just re-package existing information. And we want to see the duty embedded across every firm at every level, with leadership from boards."
Some organisations have highlighted concerns in recent weeks around customer services or products.
Which? said earlier in July that nearly half (48%) of people who have made a claim about home, travel, motor and pet insurance experienced at least one problem during the process.
Problems included consumers needing to repeatedly chase insurers for information, and firms not responding appropriately when people were struggling due to the incident they were claiming for, the consumer group said.
Moneyfactscompare.co.uk also said in July that savers have typically been earning lower rates of interest on easy access accounts which are closed to new business than the equivalent rates on "live" deals.
The website said the difference between the average closed rate and live rate on easy access accounts has widened from 0.08 percentage points in July 2022 to 0.31 percentage points in July 2024.
The average rate for an easy access account that is closed to new business was found to be 2.82%, compared with the live easy access rate at 3.13%, based on someone having a GBP10,000 deposit.
Michael Shand, managing principal at financial services focused technology and management consultancy Capco, said: "The last year has demonstrated the potential for change that puts customers front and centre, challenging firms to be more creative and innovative in delivering better customer outcomes."
He said management and boards should assure themselves that underlying data is sufficiently granular and that there are robust actions in place to address areas of customer harm.
By Vicky Shaw, PA Personal Finance Correspondent
Press Association: Finance
source: PA
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