The City regulator’s director of consumer and retail policy Nisha Arora has said the Financial Conduct Authority’s (FCA) proposed consumer duty will set the standards for firms in all retail markets.
Speaking at the Westminster Business Forum, Arora said that the consumer duty, which would set higher expectations for the standard of care that firms provide to consumers, will give firms greater focus on consumer outcomes.
She said later that this year, the FCA plans to consult on proposed rules and will set out its approach to supervision and enforcement.
Arora said that they will need to test what happens when consumers use their products and services, so if credit products are causing financial harm or are not delivering the right outcomes, companies will need to fix this.
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“We see many good practices from credit firms, but we also see poor practices that hamper good decision-making, or that exploit behavioural biases and vulnerabilities,” Arora said.
“That leads to products that are poor value or not fit for purpose, unacceptable customer service, and information that misleads consumers or fails to help them understand what they’re signing up to.
“As market offerings become more complex and digitalisation increases the speed of transactions, consumer decision-making becomes even harder.
“We need to ensure our regulation adapts to the changing market environment. When we think back to how different consumer credit was five or 10 years ago, it underlines the importance of adaptive regulation that can respond and develop as the market does.”
Arora said the City regulator is also continuing to work on fair outcomes for credit borrowers in financial difficulty and making sure that lenders provide borrowers with the appropriate tailored support they need when they get into difficulty, while taking into account vulnerability.
She said the FCA expects to see many people remaining in or falling into financial difficulty over the coming months, and feeling the impact of price rises and the ending of temporary support measures such as furlough and the Universal Credit uplift.
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“Consumer credit is a huge and diverse market, populated by firms of all sizes, that’s changing rapidly through innovation, technology and evolving consumer needs,” Arora said.
“All of us – firms, consumer and debt advice organisations, government and the FCA – need to continue to respond quickly and work together to make sure it works well for consumers as they continue to face economic uncertainty and financial pressures.
“We will regulate to encourage innovation, competition and high standards of conduct and consumer protection, especially for those most at risk. We will maintain our close focus on consumer outcomes and bring to bear our more innovative, more assertive and more adaptive approach.
“And we will continue to prioritise our credit work, to help build a responsible, sustainable market that delivers the best possible outcomes for the millions of borrowers who use it every day.”