The overarching aim of the Duty is to set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first, leading to improved consumer outcomes. It has been incredibly resource-intensive for firms to implement as they have had to review and test all their current practices against the new requirements.

Consumer Duty covers four main areas – products and services, price and value, consumer understanding and consumer support. 

So what’s new about Consumer Duty?

The Duty builds on the principle of treating customers fairly, which has been in place for some time. Firms are committed to delivering good outcomes for customers, and the Consumer Duty will reinforce these high standards. In order to implement the new rules firms have been reviewing every touchpoint with the customer and almost every aspect of their business. 

Will Consumer Duty impact on price?

There has been much debate recently about the pricing of mortgages and savings. The Consumer Duty rules require firms to analyse their products and services to ensure they provide fair value with a reasonable relationship between the price consumers pay and the benefit they receive. So it won’t necessarily change prices, and firms will still be able to charge different rates for different products. However, firms will need to be able to justify the price they charge to themselves and their Boards and keep that under review. The FCA will also be able to ask to see those justifications to see if they take account of everything the regulator would expect to see and will be able to take action if they’re not satisfied.

Using savings rates as an example, these are driven by a number of factors, not just the Bank of England’s Bank Rate – one key factor is whether someone wants instant access or can deposit money for a longer period of time. If the customer wants to access their money at any time interest rates will usually be lower to reflect the flexibility that offers. Conversely, interest rates will tend to be higher if the customer is prepared to deposit money for a longer period.

What difference will customers see?

We don’t think customers will see wholesale changes from 31 July but will likely see clearer explanations of products and services, and continued improvements in customer support. Firms have been focusing particularly on processes that might make it difficult for customers to do what they want, particularly vulnerable customers or those in financial difficulty, whether that’s digitally, on the phone or in person, and seeing what they can do to make it easier.  More communications will be tested directly with customers to ensure that they’re easy to understand and the customer knows what is required of them.

Overall, Consumer Duty is not a ‘big bang’ moment. It builds on customer focused products and services from firms and we expect customers to see evolution, not revolution.