Companies must put an end to rip-off charges and make it easier for consumers to switch or cancel services, under new rules to be introduced by the Financial Conduct Authority (FCA).
The new policies, designed to “fundamentally improve” how firms serve consumers, come under the FCA’s new Consumer Duty. which will set “higher and clearer standards” of consumer protection across financial services and will require firms to put customers’ needs first.
It is hoped the changes will introduce healthy market competition and put an end to consumers being overcharged and receiving poor customer service.
The FCA has been consulting on the plans for some months but has confirmed today they will be going ahead.
Requirements for firms going forwards include ending rip-off charges and fees, making it as easy to switch or cancel products as it was to take them out in the first place and ensuring that companies provide products and services that are right for their customers.
They will also have to offer “helpful and accessible” customer support and provide timely and clear information that people can understand about products and services so they can make good financial decisions.
The regulatory body also said there must be a focus on the “real and diverse needs” of customers, including those in vulnerable circumstances.
Firms are being given 12 months to implement the new rules for all new and existing products and services that are currently on sale.
They will be extended to closed book products 12 months later, to give firms more time to bring these older products, that are no longer on sale, up to the new standards.
It has not explained what will happen to firms that do not meet the new requirements.
Sheldon Mills, executive director of consumers and competition, said: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first.
“The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards. As the Duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”
Experts have praised the decision to bring in the duty but some say the decision has come far too late, suggesting that firms should have to change their methods quicker than the current one-year deadline.
Matthew Upton, director of policy at Citizen’s Advice, said: “Customers should get good service at a fair price. Yet time and time again we see firms overcharging loyal customers, selling poor products and making it tricky for shoppers to make careful, informed decisions.
“In a fast-changing world, it’s harder than ever for regulators to adapt and protect consumers. We support the Consumer Duty, but the wait for it shouldn’t be seen as a green-light for firms to play fast and loose with customers while they can.”
Others asked for tough penalties where firms fail, especially in light of the cost of living crisis.
Rocio Concha, Which? Director of Policy and Advocacy, added: “There are too many instances where the financial services market does not meet consumer needs or provide customers with adequate protection, so we are pleased the FCA has confirmed it will introduce a new duty to raise standards and place consumers at the heart of what businesses do.
“Strong consumer protections are always needed, but at a time when household budgets are being squeezed by a cost of living crisis, they are even more essential.
“The financial industry must get on board with these new protections, and firms that are in a position to do so now shouldn’t wait for them to be formally introduced to deliver positive change for consumers. Where businesses fail to meet the new rules, the FCA must stand ready to impose tough penalties.”