FCA Consumer Duty enters into force: how will customer rights change?
- Finance firms will now have to prove that they are acting in the best interest of the client
- It gives consumers a new weapon to fight against companies that treat them unfairly
- From fairer fees to simpler complaints procedures, we’re looking at what could change
New rules coming into effect tomorrow should encourage financial firms to improve standards and put customer needs first.
Consumer rights rules introduced by the Financial Conduct Authority (FCA) require businesses to prove they are acting in the best interests of customers by providing them with clear information, helpful customer service and fair-priced deals that meet their needs.
It’s unclear how effective the city watchdog’s rules will be in forcing businesses to brush up on their actions.
Finger on the pulse: Customers have a new weapon to add to their arsenal when they argue with financial firms over poor service or unfair pricing
But the good news is that starting tomorrow, customers can add a new weapon to their arsenal when they argue with financial firms about poor service or unfair pricing.
Here we reveal what the plans mean for you and how your rights change.
It should be easier to file a complaint
Companies will be required to provide useful information to customers and offer products that work as expected.
If you’re not happy, you should be able to change or cancel your accounts and services just as easily as you bought them.
Rocio Concha of campaign group Which? says, “If consumers feel that a company is not meeting these new standards and they want to make a complaint, they should report it directly to the company.”
Businesses will be held to higher standards, so if you make a complaint and feel they’re not complying with the new rules, quote “consumer duty.”
Higher standard: The new consumer tax should force financial firms to provide products that work as described – and make it easier for customers to complain if they don’t
Savers should get better rates
Large banks are under fire because they do not pass higher rates on to savers. But under the new guidelines, banks are required to offer customers ‘fair value’ and will have to justify their rates – otherwise they will be penalized.
Banks will also have to tell savers when a better interest rate is available. This means more savers will be aware that their money could languish in accounts with meager returns.
The plans also aim to make it easier to switch accounts by ensuring that exit charges on fixed-term savings products are ‘proportionate and reasonable’.
> Find the best savings rates using This is Money’s best-buy charts
A handful of banks and building societies have already made changes to ensure they comply with the new rules.
This month, Santander expanded its online-only eSaver and eIsa to customers who want to bank in a branch or by phone.
Until now, it reserved its highest paying deals for those who bank online. Other major banks are expected to follow suit and expand online-only accounts to all customers so more people can access the best rates.
Companies are not allowed to charge ‘unjustified’ costs
Companies are no longer allowed to charge ‘unjustified’ costs that are disproportionate to returns. This means that you should not be charged unreasonably high fees to maintain an account that is not generating a profit.
Insurers also need to offer customers products that meet their needs, said Sheldon Mills, executive director of consumer and competition at the FCA.
In a recent speech, he said that customers should be able to “invest in their future in the knowledge that companies are providing them with the right products for their needs.”
Sheldon Mills: FCA’s executive director of consumer and competition has said financial firms need to offer their customers products that meet their needs
Insurers must show how they calculate premiums
Last year, the city’s watchdog banned a devious pricing strategy used by some major insurers called the “loyalty penalty.” Insurers would routinely charge existing customers more than new ones, in an effort to lure new customers.
The guidance coming in tomorrow should go a step further by forcing insurers to reveal how they calculate their premiums.
The rates offered must provide ‘real value’ and must not take advantage of vulnerable customers or those on low incomes.
Customers also get more clarity when they submit a claim, because insurers will have to give an appropriate reason if a claim is unsuccessful.
However, there are fears that insurers may fall short of these standards just days before they go into effect.
More than three in four motor insurance customers in the UK say their provider has not provided an explanation as to why a claim was rejected, partially accepted or disputed, according to research by Which?.
Historically, such a lack of explanation has made it more difficult for drivers to challenge or file a complaint with the financial ombudsman service. In theory, the rules could mean more auto insurance appeals will be successful, says Scott Dixon of The Complaints Resolver.
He adds: ‘The consumer tax raises the bar for businesses, so that consumers have a better chance when they appeal against a rejected claim. But they will still have to make strong claims and hold on to their guns if they feel they have been treated unfairly.”