FCA Changes It’s Approach to Protecting Consumers

A new mission statement published by the FCA titled ‘Our Future Approach to Customers’ has been released. The document details the FCA’s vision for how regulation of the financial services industry can be adapted to better serve customers. There are four key points set out in the document, which has been welcomed by numerous financial companies.

The Mission Statements

1. Consumers are enabled to buy the products and services they need because the environment in which they are sold is clear, fair and not misleading with a good choice architecture.
2. Products: high-quality, good value products and services that meet consumers’ changing needs.
3. Inclusion: everyone is able to access the financial products they need and the needs of vulnerable consumers are taken into account.
4. Protection: consumers will be appropriately protected from harm

The FCA has recognized it has a responsibility to consumers, and that balanced and fair judgments need to be made. With such a diverse range of customers in the UK financial markets, firms must act in line with regulations.  The FCA also said in a recent statement that “We expect consumers to take reasonable responsibility for their choices and decisions. The precise degree of reasonableness will depend on the circumstances, for example a consumer who has taken regulated advice should be able to rely on it being appropriate.”

With over £2 billion being spend every day on UK credit cards, it’s important that customers are adequately protected. The FCA also recognizes that consumers with low levels of financial knowledge and low confidence in managing their finances are not exploited by companies providing financial services. It’s important that regulations take into account that consumers have different needs and that it can be difficult for companies and regulators to set universal expectations of customers.

Tom McPhail, head of policy at Hargreaves Lansdown, commented on the regulations by saying  “This is good stuff; the FCA clearly recognises the importance of not just regulating financial markets effectively but also looking at how those markets serve the financial well-being of their customers. We are also encouraged to see the Regulator talking about ease of access to financial services and products for consumers; this is not just about helping vulnerable customers, though it is right the FCA emphasises this priority, it is about improving financial outcomes for everyone, right across the UK.”

Stephen Lowe, group communications director at Just, added that “The FCA is right to acknowledge that many existing regulatory requirements, compounded by the behaviour of firms, are not having the desired effects. We welcome the report’s focus on more effective measures, the need for which has also been recognised through amendments to the Financial Guidance and Claims Bill that recognise how auto-enrolling pension savers into guidance is likely to improve outcomes. Regulation is shifting to better protect consumers while still offering flexibility and freedom.”