The Consumer Duty Principle

The intention is for the Consumer Duty to go further than the existing Principles 6 (treating customers fairly) and 7 (clear, fair and not misleading communications), which will not apply where the Consumer Duty does. While existing Handbook and non Handbook material linked to Principles 6 and 7 will continue to apply, firms need to take account of the inherent limits of such guidance as they do not cover the FCA’s expectations under the Duty. The FCA has made clear that failure to act in accordance with such Principle 6 and 7 guidance would likely be a breach of Principle 12.

The Consumer Duty requires firms to act in accordance with the standard that could reasonably be expected of a prudent firm carrying on the same activity taking appropriate account of the needs and characteristics of retail customers in the relevant target market or of individual retail customers, as the context requires.

In the FCA’s view, a prudent firm is a firm that fully embeds the Duty, acts in good faith to meet its requirements, complies with all other relevant law and delivers good outcomes for consumers. Firms cannot benchmark their compliance to existing low standards and poor practices. The FCA has suggested that firms ask themselves whether they are applying the same standards and capabilities to delivering good consumer outcomes as they are to generating sales and revenue and whether they are equally efficient in handling complaints as converting sales.