The new rules demand the incorporation of a new consumer principle, that asks firms to provide good outcomes for retail customers, details cross-cutting rules, which consist of expectations for behaviour across three common themes, and provides rules relating to four outcomes the FCA expects to be delivered.
It also includes behavioural and administrative requirements for the dealing of vulnerable customers.
The new deadline is for existing products and services. For closed items, firms have until 31 July 2024 to comply.
The four outcomes consist of the products and service outcome, the price and value outcome, the consumer understanding outcome, and the consumer support outcome.
Regarding price and value, the FCA says that mortgage brokers, “must obtain .rmation from the manufacturer [of a product] such as a high-level summary of the benefits to the target market, .rmation on overall prices or fees and confirmation that the manufacturer considers that total benefits are proportionate to the total costs.
“The firm must also ensure that its own fees and charges are fair value and that payment of these does not result in the product or service ceasing to be fair value overall.”
And for lenders, “firms must be able to demonstrate that their product and any associated charges provide fair value for the target market.
“This includes making consideration of the overall charges that the customer might pay, including any that might be levied as a result of the firm’s distribution strategy.”
The rules continue: “Firms should factor such average intermediary fees in their value assessments and must also ensure that distributors have the necessary .rmation to carry out their own assessment of value.”
Yesterday, MFG sister title Mortgage Strategy quizzed a number of people in the mortgage industry what they thought about the new rules.
SimplyBiz head of business consultancy Karl Dines says the rules, despite being “pretty much what we expected”, show that “additional work will be needed from all advisers.”
He explains: “The fair treatment of clients with vulnerable characteristics, safeguarding of consumer rights, and delivery of the most suitable solution for a client’s needs and circumstances are already observed by the vast majority of advisers – the additional work lies in the creation of processes to meet, and document that you are meeting, the requirements of the new ‘consumer principle’, and its keen focus on demonstrable client support, understanding, and value.”
And from the lender point of view, The Finance & Leasing Association director of consumer and mortgage finance Fiona Hoyle says: “The consumer credit industry fully supports the underlying principle of the consumer duty – that consumers receive clear .rmation about products and services that meet their needs and offer fair value, and that customer support is t. when needed.
“However, today’s announcement thrusts the full responsibility for achieving this objective onto lenders, when in actual fact the real problem is the outdated and opaque, but nonetheless prescribed, .rmation required to be sent to customers by the Consumer Credit Act (CCA).
“It is imperative that HM Treasury’s previous agreement to reform the CCA is taken forward at pace.
“While we welcome the extension of the implementation deadline for the new consumer duty rules, it remains a mammoth task for firms to complete the required work within this timeframe.”