Consumer Duty Comes into Effect in the UK

Monday, 31/07/2023 | 06:01 GMT by Arnab Shome
  • Consumer duty rules for products and services that are open for sale and renewal have become effective.
  • A survey found that a third of the firms would not fully comply with the rules by the deadline.
fca
Bloomberg

The United Kingdom’s Consumer Duty rules for financial services firms have come into effect today (Monday). Considering this, companies registered with the Financial Conduct Authority must align their services to abide by the rules to ensure consumer protection. These rules will apply to payment firms, asset managers, insurance firms, brokers, and more, covering about 60,000 companies. But, are they prepared?

UK Firms Must Comply with Consumer Duty Rules

In an industry-wide survey of over 1,000 regulated financial services companies, the FCA found that a third of the participants would not be compliant with the new rules by the deadline. When it comes to forex and contracts for differences (CFDs) brokers, only 61 percent would meet all the requirements, whereas a further 30 would meet only some of the rules.

The complaint figures for the FX/CFDs industry are much higher than the others.

FCA survey consumer duty

However, the entire British financial services industry will need to be compliant with the 121 pages of guidance. In short, these rules are focused on delivering “good outcomes” to retail customers.

Ask Yourself Some Basic Questions

According to the FCA, when deciding on products and services, firms need to ask themselves some basic questions, including “Am I treating my customers as I would expect to be treated in their circumstances? [and] Are my customers getting the outcomes from my products and services that they would expect?”

In an interview with Finance Magnates, the FCA elaborated that it would take assertive action against violators of the consumer duty rules by identifying harm to consumers. It will also prioritize serious breaches and take “robust action, such as interventions or investigations, along with possible disciplinary sanctions.”

However, one of the major concerns around the implementation of consumer duty is the costs. According to Reuters, firms need to spend an estimated one-time amount of GBP 2.4 billion ($3.1 billion) to implement the Consumer Duty rules. Because of the hefty cost, the industry is divided about its long-term cost-effective benefits.

Initially, the FCA proposed the Consumer Duty in 2021 but only published details of the rules last year. Though the rules are already applicable to products open for sale and renewal, products no longer on sale will have just 12 more months to comply with the deadline of July 31, 2024.

New Zealand's FMI standards; ICE delists Bakkt's contracts; read today's news nuggets.

The United Kingdom’s Consumer Duty rules for financial services firms have come into effect today (Monday). Considering this, companies registered with the Financial Conduct Authority must align their services to abide by the rules to ensure consumer protection. These rules will apply to payment firms, asset managers, insurance firms, brokers, and more, covering about 60,000 companies. But, are they prepared?

UK Firms Must Comply with Consumer Duty Rules

In an industry-wide survey of over 1,000 regulated financial services companies, the FCA found that a third of the participants would not be compliant with the new rules by the deadline. When it comes to forex and contracts for differences (CFDs) brokers, only 61 percent would meet all the requirements, whereas a further 30 would meet only some of the rules.

The complaint figures for the FX/CFDs industry are much higher than the others.

FCA survey consumer duty

However, the entire British financial services industry will need to be compliant with the 121 pages of guidance. In short, these rules are focused on delivering “good outcomes” to retail customers.

Ask Yourself Some Basic Questions

According to the FCA, when deciding on products and services, firms need to ask themselves some basic questions, including “Am I treating my customers as I would expect to be treated in their circumstances? [and] Are my customers getting the outcomes from my products and services that they would expect?”

In an interview with Finance Magnates, the FCA elaborated that it would take assertive action against violators of the consumer duty rules by identifying harm to consumers. It will also prioritize serious breaches and take “robust action, such as interventions or investigations, along with possible disciplinary sanctions.”

However, one of the major concerns around the implementation of consumer duty is the costs. According to Reuters, firms need to spend an estimated one-time amount of GBP 2.4 billion ($3.1 billion) to implement the Consumer Duty rules. Because of the hefty cost, the industry is divided about its long-term cost-effective benefits.

Initially, the FCA proposed the Consumer Duty in 2021 but only published details of the rules last year. Though the rules are already applicable to products open for sale and renewal, products no longer on sale will have just 12 more months to comply with the deadline of July 31, 2024.

New Zealand's FMI standards; ICE delists Bakkt's contracts; read today's news nuggets.

About the Author: Arnab Shome
Arnab Shome
  • 6528 Articles
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About the Author: Arnab Shome
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
  • 6528 Articles
  • 87 Followers

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