What is Consumer Duty? 

The Financial Conduct Authority (FCA) has developed a new principle, Consumer Duty, the aim of which is to set higher and clearer standards within the financial services sector, to better protect and actively enhance outcomes for consumers. Following consultation stages and finalisation of the rules last summer, the FCA’s new Consumer Duty will come into effect on 31 July 2023. 

Why is this happening?

The UK regulator wants to ensure financial services companies are always acting in the best interests of all their customers. Consumers have repeatedly borne the brunt of impacts from the cost-of-living crisis, bad actors from the world of personal finance, and the repercussions of Brexit and COVID-19. As a result, the FCA is placing the onus on financial services providers to put the needs of consumers first, and clearly demonstrate how they’re doing this. 

The new rules are cross-cutting, and touch everything spanning products and services, price and value, consumer understanding, and customer support. At its heart, this means considering the individual needs, characteristics, and aims of retail clients along the whole financial journey. 

The FCA’s new rules will go live on 31 July 2023. They will also apply to closed products, which are no longer marketed or distributed to retail customers, from July 2024.

What does this mean for businesses?

Many financial services companies, like Equifax, will already be adhering to the spirit of Consumer Duty. This means putting the needs and interests of their customers first and helping people live their financial best. 

The new standards do, however, place greater expectations on companies to be able to evidence exactly how they’re doing this. 

For other businesses, the rules could be a real step change for the better in how they operate. This means not just higher reporting and evidencing standards, but an evolution in their fundamental relationship with customers, towards putting their needs first. 

It could also mean drawing on innovative, data-driven solutions - such as those already being harnessed by many Equifax partners - to help meet their Consumer Duty obligations. 

What does this mean for consumers?

The new Consumer Duty standards may not bring about immediate or noticeable changes for all members of the public whilst others could see a direct change in how financial services companies communicate with them. For instance, they may receive more proactive communications from creditors about how to seek support if they are struggling to make repayments. They may also be offered introductions to other debt advice agencies, such as StepChange, who can advise further on managing household finances.  

An overall aim of Consumer Duty is to make information about financial products and services, as well as support when facing financial difficulty, easier to access and more tailored to individuals. 

Each financial services company in the UK will still be bound by the FCA’s standards and guidelines on how to deal with customers fairly. Consumer Duty will help to ensure that this happens in a way that is useful to customers today, as they live through the current economic crisis. 

Creating tools to help improve everyday financial well-being and guidance on building better personal finance discipline will remain a priority for those like Equifax and our sector partners.