During a speech delivered at EY, Sheldon Mills, executive director, consumers and competition at the Financial Conduct Authority (FCA), said: “Our supervisory and enforcement approach will be proportionate to the harm – or risk of harm – to consumers, with a sharp focus on outcomes.
“We will prioritise the most serious breaches and act swiftly and assertively where we find evidence of harm or risk of harm to consumers.”
He added: “In some cases, firms can expect us to take robust action, such as interventions or investigations, along with possible disciplinary sanctions.”
Mills said Consumer Duty expected “high standards” of firms but added that this was right, and companies should strive to meet these standards.
Encouraging change
He said the rules would fundamentally change cultures as well as see the regulator become more data-driven and focused on outcomes.
Mills added: “As a regulator, the duty will provide us with a lens through which we can assess our rules so that in future, we do not duplicate regulations that are already implicit in the duty. This should, over time, simplify some of the complexities in our rule book.”
Consumer Duty should also enable firms to be innovative, be “agile” when rolling out products and services, and create a “foundation of trust”, Mills said.
Assessing fair value
The regulator published a review into how firms were implementing the fair value framework and found that “substantial efforts” were being made.
The FCA said firms had “carefully considered both our price and value requirements and the shift in focus to consumer outcomes” but it had questions around how effective some of these changes would be in practice.
Based on the work done so far, the regulator companies needed to further consider how to collect and monitor evidence that a product or service provides fair value as well oversight and accountability of remedial actions if they do not.
Products and service at the right price
It also wants firms to have sufficient analysis on how different consumer groups will receive fair value and a summary of assessments, so decision makers can determine whether a product or service provides fair value.
Mills said lenders should not charge “unreasonably high” fees or interest rates to certain customers, such as those with persistent debt or poor credit history.
He added: “Fair value is also about more than price: “Value should include consideration of the quality and benefits of the product or service.
“We want firms to look at their product and really examine and challenge themselves about whether the cost of a product or service really is reasonable relative to the overall benefits.
“The assessment is crucial, not only in terms of the upfront price and value but also throughout the lifetime of the product.”
Mills said: “The duty will mean that consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.”
