The level of consumer protection in the financial services sector is rapidly increasing and firms are now expected to make long-term strategic decisions to place their focus on fair business practices and provide effective actions to achieve good customer outcomes. Recurrent and more recent issues such as the focus on vulnerable customers, the COVID-19 pandemic, the development of digitalisation and innovation in financial products and services can weaken the consumers’ position when they make a financial decision. Our Consumer Reform team explore the issues.

In May 2021, the Financial Conduct Authority (“FCA”) commenced a consultation process on a new Consumer Duty and has signalled its intention to pursue outcomes-based regulation when it comes to consumer protection. While this publication is applicable to the UK market, KPMG reflects here on how it can be read as a guide for Irish firms to assess their current Conduct Risk Framework and governance structure to meet future regulatory expectations.

Background to the UK Consumer Duty

Various external factors and new issues have intensified the focus on detrimental consumer outcomes and given grounds for the introduction of a new Consumer Duty for firms. This is especially the case with the growing dependence on digital products and services. While customers are now offered a wider range of solutions which increases competition and drives prices down, this new environment has proven riskier and more complex. The COVID-19 pandemic has exposed the impact that technological innovations can have on vulnerable consumers and the potential problems arising when firms do not address their customers’ financial literacy.

To achieve better customer outcomes, the FCA has proposed a set of rules and guidance that comprises the following elements:

  • A new Consumer Principle that sets the general standards of expected conduct;
  • Overarching Cross-cutting Rules which develop these expectations and their application firm-wide; and
  • Four Outcomes which are a set of rules and guidance providing more detailed expectations for firms’ conduct that form part of an optimal firm-customer relationship.

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The pace of change is challenging leaders like never before. To find out more about how KPMG perspectives and fresh thinking can help you focus on what’s next for your business or organisation, please get in touch with our team below. We’d be delighted to hear from you. 

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