31 July 2023 , 07:54
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Customers will be given greater protection against poor service and rip-off fees under new financial service rules that kick in from today.
The new Consumer Duty came into force on July 31 for new and existing products and services and is being implemented by the Financial Conduct Authority (FCA).
As part of these rules, businesses will have to prove they're acting in the best interest of customers. They'll be required to provide clear information, make it easier to switch and cancel deals, and only offer suitable products and services.
For example, speaking earlier this month, FCA chief executive Nikhil Rathi said savings providers should keep customers informed about available rates so people aren't left languishing in poor accounts.
Consumers should also get support when they need it and additional care must be given to “vulnerable customers” who are more susceptible to harm.
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Consumer Duty was finalised by the FCA last summer and businesses were given 12 months to implement changes. The Consumer Duty will require financial firms to:
- End rip-off charges and fees
- Make it easier for customer to switch or cancel products
- Give helpful and accessible customer support
- Give clear information that people can understand
- Not bury key information in lengthy terms and conditions
- Provide products and services that are right customers
- Focus on the needs of the customer
But the new rules will not apply to past actions by firms - only if something has happened after July 31. Consumer Duty will be extended to closed book products - ones that are no longer on sale - in a further 12 months.
In addition, the FCA has launched a consultation on toughening up safeguards against financial products on social media.
Sheldon Mills, Executive Director of Consumers and Competition, said: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions.
“The financial services industry needs to give people the support and information they need and put their customers first. The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards.
“As the Duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”
If you've been treated badly by a customer, you should first complain to that company so they have a chance to put it right.
If you're not happy with their response, or they don't get back to you within six weeks, you can then escalate your complaint to the Financial Ombudsman Service (FOS).
You need to make a complaint to the FOS within six months from the date on your final response. The FOS is free to use.
Rocio Concha, Which? Director of Policy and Advocacy, said: "The Consumer Duty is the Financial Conduct Authority's response to what it sees as too many customers being ripped off in financial services. A set of higher standards for firms to follow should raise the bar for consumer protections - giving people much more confidence when buying products or services.
"Whether you have a bank account, insurance policy, mortgage, credit card or want to take out a loan, the Consumer Duty is clear that firms should ensure that the product and service meets customers' needs, offers fair value and that customers have enough information to make an informed choice and are supported throughout.
"The Duty should have wide-ranging consequences. In practice, it should mean that the terms and conditions of insurance policies are easy to understand, that banks alert customers of better savings rates, and that lenders proactively help any mortgage customers in financial difficulty with tailored support."
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