In April the FCA published its Mission, which explained how and why it prioritises , protects and intervenes in financial markets. Its publication marked the FCA’s intention to be more transparent about the way it works and explained how it is accountable for the way it carries out its role.
In its Mission, the FCA said that it would publish a number of documents giving further detail about how its approach will be reflected in its wider work. The FCA has now published its Approach to Consumers paper which explores its approach to regulating retail consumers. It sets out the FCA’s initial views on what good looks like for all retail consumers, and aims to clearly explain how the FCA will work to diagnose and remedy actual and potential harm, giving more certainty about the regulator’s framework.
The FCA vision is that in all markets it wants to see:
- 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; and
- high-quality, good value products and services that meet consumers’ needs.
In addition, where markets are working well for consumers the FCA should be able to observe:
- inclusion – where everyone is able to access the financial products they need and the needs of vulnerable consumers are taken into account; and
- protection – consumers are appropriately protected from harm.
Among other things the FCA mentions in the paper that it expects firms to frame decisions for customers based on real world consumer behaviours and not to exploit biases. The regulator also expects them to exercise extra care where consumers may be vulnerable. Best practice should take on board positive uses of behavioural research to help customers towards better outcomes.
Interestingly, the FCA also discusses the introduction of a new duty of care for firms. This would impose an obligation for firms to exercise reasonable skill and care in the provision of services to consumers. The FCA notes that opinions differ about what the exact nature and effect of a duty of care might be. The FCA recognises that whatever is done, it needs to undertake a thorough and detailed consideration of the issue against the effect on the Handbook as a whole. The FCA believes that this is best done following the UK’s withdrawal from the EU. The FCA will publish a Discussion Paper to explore the duty of care issue as part of the broader exercise of reviewing the FCA Handbook.
View FCA publishes Future Approach to Consumers, 6 November 2017