Consumer Duty: What is it and how will charities benefit?

The Financial Conduct Authority (FCA) has introduced a new requirement called Consumer Duty.

The Duty sets higher and clearer standards of consumer protection across financial services. Banks and other financial institutions (often called ‘firms’) have been busy putting plans in place to comply with the new rules, which came into effect on 31 July.

Here’s our breakdown of what to expect.

Consumer Duty requires firms to ensure ‘good outcomes’ for all customers. They also need to provide data and evidence to show they’re achieving these good outcomes.

The FCA’s guidance (pdf, 1.1MB) is clear on what ‘good outcomes’ are. Firms should provide customers with the following.

• Products and services that:
  • meet their needs
  • offer fair value
  • help them achieve their financial objectives
  • do not cause them harm.
• Communications that they can understand and that enable them to make effective, timely and informed decisions.
• Helpful customer support that’s easy to access.

Firms must review their existing policies, pricing, training and customer journeys. This includes web pages, call centre scripts, customer feedback and complaints processes, and more.

This has been an enormous task. One bank told us they’ve reviewed hundreds of policies and processes to make sure they’re ready for the Duty.

As well as reviewing existing products and services, firms must also now embed the Duty’s principles in their future work.

Evidencing good outcomes

Evidence is a key part of Consumer Duty. Firms must prove they’re providing good outcomes for every single customer, no matter their individual circumstances.

For example, the FCA’s guidance says:

This means firms need to have a clear understanding of their customers’ expectations. They must also be able to show they’re meeting the expectations of every customer group.

The FCA’s head of competition policy, Ed Smith, explains what firms should be doing on outcomes.

This includes identifying and addressing poor outcomes, and collecting, analysing, and understanding outcomes data.

Consumer Duty applies to financial products and services for retail customers. This includes charities and voluntary organisations.

It’s important you know what to expect from financial institutions, including your bank, from 31 July. You should now get the following.

• Clear communications that you can understand.
• Fair prices for products and services.
• The same deals as new customers. New customers shouldn’t have advantages over existing customers. For example, they shouldn’t be offered a lower price for a product.
• Information about new products that are more competitive. For example, your bank should tell you if they open a new savings account that has a better interest rate than your existing account.
• Good customer support.
• Appropriate ways to get help and provide feedback. For example, if your bank isn’t open 24 hours, they should provide an out of hours service for reporting fraudulent activity.

What you can do

You should feel confident challenging firms if you don’t think they’ve provided you with good outcomes.

You should make sure your experience is captured in their data. You can do this by:

• engaging with their website. Page views will help them understand the areas and questions that customers are struggling with
• responding to surveys and requests for feedback, including if you decide to leave
• calling their helpline and speaking to staff. You can ask them to record your experience and concerns
• making a complaint. All firms should review their complaints data. The best firms will use it as an opportunity to improve customer service.

If you’ve tried to provide feedback to your bank but are still experiencing challenges, you might want to report your experience to the Financial Ombudsman service for small businesses.

This service can help charities with annual turnovers of less than £6.5m and trusts with a net asset value of less than £5m. You can check your eligibility for the Ombudsman service.

Our next steps

As well as our ongoing work with UK Finance we’re considering how we can influence banking policy and practice.

For example, we want the FCA to review outcomes for charities and community organisations as part of the Consumer Duty going forward.

Sign up for email updates and follow us on Twitter to stay up to date with our influencing work.

• Use our online help and guidance to support good financial management.
• This includes specific guidance on banking for charities and voluntary organisations.
• If you need help with a banking issue, you can also get in touch with our small charity helpdesk.
• We also offer a range of financial management training.