The Financial Conduct Authority (FCA) has published its ‘approach to consumers’, explaining a variety of ways in which it seeks to protect the interests of consumers.

In introducing the document, chief executive Andrew Bailey noted that two of his organisation’s operational objectives are directly connected with the interests of consumers. These are:

  • Securing an appropriate degree of protection for consumers
  • Promoting effective competition in the interests of consumers

The document describes the following characteristics of well-functioning markets:

  • Consumers can easily access relevant information
  • Consumers can switch products where it is in their interests to do so
  • A range of good quality products and services is available that meet consumer needs and which represent value for money
  • Consumers are not unduly excluded from financial services
  • Basic financial services are available to all
  • The needs of all consumers, including vulnerable consumers, are taken into account
  • Consumers are not exposed to deceptive or unfair practices by financial services firms
  • Consumers are provided with the appropriate level of protection against fraud and scams
  • Systems are in place to provide redress to disadvantaged customers where necessary
  • Consumers are prevented from taking out products that carry a high risk of detriment

The FCA promises to “ensure an appropriate level of protection for all consumers.”

Firms were warned to have measures in place to protect vulnerable customers. On this subject, the approach document says:

“We expect firms to pay attention to indicators of potential vulnerability and to have policies in place to deal with consumers who may be at greater risk of harm. For example, we will intervene by taking enforcement action where vulnerable consumers are deliberately exploited.”

This has relevance to all authorised firms, but especially for the consumer credit sector.

The next section notes that, while the requirement to treat customers fairly in Principle 6 is well-known, the interests of customers/consumers are in fact referred to in five of the FCA’s 11 high-level principles:

  • Principle 2: Skill, care and diligence – A firm must conduct its business with due skill, care and diligence
  • Principle 6: Customers’ interests – A firm must pay due regard to the interests of its customers and treat them fairly
  • Principle 7: Communications with clients – A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading
  • Principle 8: Conflicts of interest – A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client
  • Principle 9: Customers: relationships of trust – A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment

The regulator notes that where it finds evidence of consumer harm, it can take action on several levels, including:

  • Issuing consumer warnings about certain markets or products
  • Taking enforcement action against individual firms
  • Taking action across a market to protect consumers from practices that carry a risk of harm, e.g. imposing a payday loan cap

The document also warns firms that their applications for authorisation will be refused if they cannot demonstrate that they will operate in the interests of consumers, and that senior management have an important role to play in ensuring the firm’s culture protects the interests of customers.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article