The regulator said harm can arise due to failings in the support firms provide, such as under-resourced customer helplines or hard-to-navigate phone systems, menus or webchats.
Badly-designed websites that make it hard to find key information online or uncertainty about where to get support or poor hand-off processes to third-parties are all also under scrutiny.
The regulator is placing good outcomes at the heart of the 121-page Consumer Duty guidance in a regulatory about turn set to transform the face of the financial services industry.
Customers must get the same service at any stage of the lifecycle, so the same resources must be deployed on helping customers post-sale as to acquiring the initial customer. Firms need to ask themselves if they are applying the ‘same support standards to getting customers as they do to generate sales and revenue,’ it said.
Customer first
Firms must consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey. As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.
Actions likely to be inconsistent with the duty include customer journeys so streamlined that appropriate friction isn’t offered to give customers ‘thinking time’ for good decision-making. The regulator will also take a dim view of firms that add ‘unreasonable’ extra steps to the customer support process which deter customers from acting in their own best interests.
Unexpected surges in demand, causing service delays, or long call-waiting times during the mortgage process, for example, must be communicated to consumers, according to the guidance.
Sludge practices
The regulator noted there are commercial incentives for firms to create ‘friction points,’ or sludge which stops a customer taking action to help themselves, like switching provider or making a complaint.
It said: “Even where firms do not set out to create sludge, they can fail to give adequate attention and provide appropriate support where customers seek to take action that does not benefit the firm. This is not consistent with the Duty.”
In one poor practice example offered, a firm may require its customers to contact them by phone if they want to switch to a different provider. Once on the phone, customers are subjected to a lengthy process during which they are encouraged not to switch.
“This type of practice would represent an unreasonable barrier under the consumer support outcome if it prevents customers from pursuing their financial objectives,” said the FCA.
Longer deadline
The Financial Conduct Authority (FCA) is allowing firms 12 months until 31 July 2023 to implement its new Consumer Duty rules for all new and existing products and services that are currently on sale.
It had considered setting a nine-month implementation period for the new Consumer Duty, but added a three-month extension to give firms more time following an industry consultation.
For the two Consumer Duty papers out today, see:
A new Consumer Duty. Feedback to CP21/36 and final rules
Finalised Guidance FG22/5 Final non-Handbook Guidance for Firms on the Consumer Duty
