The FCA’s proposed new "Consumer Duty" – what does it mean?

The FCA has published its long-awaited consultation on "duty of care" which has morphed into a proposed package of measures intended to deliver better outcomes for consumers – together a new "Consumer Duty".

The consultation, which is open until 31 July 2021, proposes:

• a new Consumer Principle that provides an overarching standard of conduct; and
• a set of Cross‑cutting Rules and four Outcomes that support the Consumer Principle.

The proposals apply to regulated products and services sold to "retail clients" which would include SMEs.

The proposals from the FCA will add to the range of regulatory tools to address the poor customer outcomes it has identified in retail markets. The FCA has not made any specific proposals on a private right of action. It has, however, said that it would welcome stakeholders’ further views on how a private right of action could support or hinder the success of the proposals and their intended impact on firms, consumers and markets.

It is good to see that a private right of action for Principles breaches is not the focus of the Consultation Paper. In this regard, it is questionable whether a private right of action for Principles breaches would be of real benefit to consumers who already have access to the Financial Ombudsman Service (FOS), which is better suited to dealing with claims from a speed and cost perspective.

For a more detailed analysis of the FCA's case for change, the proposals and our thoughts on what this may mean for firms, please see our FSR and Corporate Crime blog post.