The FCA first started talking about the introduction of a new duty of care for consumers back in 2018. Now it has published a consultation on its proposals to introduce a new consumer duty principle, together with cross-cutting rules and guidance. The new duty is expected to apply to products and services sold to “retail clients” (everyone except professional clients and eligible counterparties) and will capture sales to small and medium sized enterprises (SMEs). It will apply to all regulated firms involved in the manufacture or supply of products and services to retail clients, even if they do not have a direct relationship with the end customer.
The regulator hopes the new duty will affect a significant shift in firms’ culture and behaviour to focus on customer outcomes and put customers in a position where they can act and make decisions in their own best interests. There is a clear emphasis on eliminating “sludge practices”, which create excessive friction that hinders consumers from making decisions in their best interests. The question of whether or not the new duty should carry with it a private right of action is on hold for now, while the FCA continues to gather stakeholder feedback.
Timeline:
- This initial consultation is open for comment until 31 July 2021.
- A second consultation, on the draft Handbook text, will follow later in the year.
- New rules will be made by 31 July 2022 (although may be subject to implementation periods).
We have prepared a short summary of the FCA’s proposals, together with our thoughts on the likely impact for firms.
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