FCA’s Sheldon Mills says too many companies don’t consider their customers’ needs when designing and selling products
This week, the city’s regulator, the Financial Conduct Authority, announced its new consumer duty – a set of rules it says will compel businesses to provide better and fairer service to customers.
Sheldon Mills, executive director of consumer and competition at the Financial Conduct Authority, explains why he thinks this will improve customer support, reduce call center wait times and end ‘fraudulent’ charges.
For all of us, making good financial decisions is essential to building a better future for ourselves and our families.
This could be saving for retirement or a summer vacation, borrowing to manage short-term expenses or buying a home, or insuring against the unexpected.
But we know that making smart financial decisions isn’t always easy, and in some ways it’s getting harder and harder.
Household budgets are under considerable pressure from inflation and rising bills.
And, while digital services have made things easier and more efficient, some people find it harder to navigate the digital landscape and may become more vulnerable to scams and fraud.
We have a leading financial services sector here in the UK. But today, too many companies don’t fully consider the real needs of their customers when designing and delivering their products, services or support.
At the FCA, we regulate approximately 50,000 financial services firms and we want to ensure that all the firms we regulate put the needs of their customers first, so that they can make good financial decisions with their hard-earned money.
Selling suitable products at a fair price, providing good standards of customer support and communications that people can understand shouldn’t be controversial.
That’s why we’re introducing a new consumer obligation, which will set higher and clearer standards for consumer protection in financial services and encourage companies in the sector to focus on delivering good results for consumers.
Selling suitable products at a fair price, providing good standards of customer support and communications that people can understand – as duty will require – should not be controversial.
As financial services firms begin to implement the consumption requirement over the next 12 months on new and existing products, we want them to focus on how they will ensure their customers get the products and services that suit them, without exorbitant fees and charges.
We want these companies to think about how to make sure their customers can easily change or cancel products they no longer need or can no longer afford, as well as how to allow their customers to contact them faster and easier, without unreasonable calls. waiting time and receive a useful response.
And we want these companies to focus on how they will ensure their communications with customers are clear and easy to understand, without key information buried in long terms and conditions that few have time to read.
Higher standards: Mills says the consumption requirement should help eliminate practices such as companies charging higher fees to loyal customers while offering cheap offers to new ones.
While financial services firms do things right first and put their customers at the heart of everything they do, the bad practices we’ve seen in the industry before, like charging high prices for unarranged overdrafts or paying more to be a loyal customer shouldn’t happen.
We recognize that meeting these new, higher standards will require significant effort from many companies in the industry. But we believe it will have a major impact on the level of protection and support that financial customers receive in the UK and we have a parliamentary mandate to push this forward.
Duty builds on some of our key sector interventions in recent years, such as tackling the insurance loyalty penalty or tackling practices that prevent people from changing, and leveling them so that they apply at all levels.
By requiring the businesses we regulate to test and demonstrate how they perform well for consumers, the obligation will give us a stronger basis to intervene quickly when we see poor practices that do not benefit consumers.
Prove it: new rules will require FCA-regulated companies to demonstrate they provide good service to their customers
Rather than just focusing on fighting evil after it has happened and gotten worse, Duty should help us prevent some serious problems in the first place.
Duty will also enable us to combat new harms as they emerge in an ever-changing industry.
We know that many companies providing financial services want to see an innovative and competitive market. These companies should welcome any action to fight competitors who lower standards.
And, with our data showing that only 35% of people believe that financial companies are honest and transparent in their dealings with them, if everyone engages with Consumer Duty, we should see greater trust in the sector in result.
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