LONDON–The United Kingdom’s Financial Conduct Authority (FCA) said it is establishing plans for a new “Consumer Duty” designed to bolster existing rules and principles in order to enhance consumer protection in retail financial markets.
The FCA is the financial regulatory body in the U.K. that acts independently of the government.
Andrew T. Price, senior VP of advocacy with the World Council of Credit Unions, noted that in the FCA’s 2020 Financial Lives survey, one-in-four respondents said they “lack confidence in the financial services industry and only 35% of respondents agreed that firms are honest and transparent in their dealings with them.”
Price said the Consumer Duty will be a requirement for firms to adhere to and is subject to regulatory enforcement for non-compliance, and that its three components include:
- The Consumer Principle, which will reflect the overall standards of behavior the FCA expects from firms. “The wording being consulted on is: 'a firm must act in the best interests of retail clients' or 'a firm must act to deliver good outcomes for retail clients’,” Price said.
- Cross-cutting rules, which would require three key behaviors from firms: taking all reasonable steps to avoid foreseeable harm to customers, taking all reasonable steps to enable customers to pursue their financial objectives, and to act in good faith.
- A suite of rules and guidance that set more detailed expectations for firm conduct in relation to four specific outcomes: communications, products and services, customer service, and price and value.”
Why Does it Matter?
Why do rules made in the U.K. matter to a credit union in the United States?
“Consumer protections adopted in one jurisdiction are sometimes used by other countries as a model,” said Price. “These developments may give insight into new requirements that may be considered in a particular country.”