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Regulatory Overhauls Protection Standards – Forbes Advisor UK

Latest information and insight from the world of regulation and consumer rights


27 July 2022: FCA Consumer Duty Rules Tighten Protections, End ‘Rip-Off’ Charges

UK regulator, the Financial Conduct Authority (FCA), is introducing rules designed to protect customers from being ripped off and to ensure they are treated fairly and get the support and service they need.

The FCA says its new Consumer Duty “will fundamentally improve how firms serve consumers. It will set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first.”

It will require signatures to:

  • end rip-off charges and fees
  • make it as easy to switch or cancel products as it was to take them out in the first place
  • provide helpful and accessible customer support, not making people wait so long for an answer that they give up
  • provide timely and clear information that people can understand about products and services so they can make good financial decisions, rather than burying key information in lengthy terms and conditions that few have the time to read
  • provide products and services that are right for their customers
  • focus on the real and diverse needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction.

Among the effects of the new requirements, which will be phased in from July 2023, will be firms being obliged to offer all customers their best deals, rather than using them to tempt new customers. This rule is already in place for car and home insurance.

The reverse will also be true in that firms will be expected to make their best deals available to new customers.

The Duty is made up of an overarching principle and new rules that will mean 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.

The FCA says the new environment should foster innovation and competition. It says it will be able to identify practices that don’t deliver the right outcomes for consumers and take action before practices become entrenched as market norms.

Sheldon Mills at the FCA 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.”


6 July 2022: Struggling Households Must Seek Help – As Worse To Come

Households struggling financially as a result of the deepening cost of living crisis, are failing to seek available support due to lack of understanding or feelings of embarrassment.

Worry, shame and fear

According to a report published today by the financial regulator, the Financial Conduct Authority (FCA) and MoneyHelper, a government-back online advice service, 42% of borrowers who had ignored their lenders’ attempt to contact them had done so because they felt ‘ ashamed’.

It also found that two-in-five (40%) people who were struggling financially mistakenly thought that talking to a debt advisor would negatively impact their credit file.

Other reasons for failing to address financial problems included doubts about the value of contacting lenders, with 20% believing it would not be of any help, and negative perceptions about the potential outcome – with 18% worried about losing access to existing credit and 16% worried about gaining access to credit in the future.

The FCA urged consumers who are struggling to keep on top of their finances to contact lenders to discuss available options, such as a potential payment plan – and to seek free advice from MoneyHelper.

More than half (52%) of borrowers in financial difficulty waited more than a month before seeking help and, of these, 53% regretted not doing it sooner.

Sheldon Mills, executive director of consumers and competition at the FCA, commented, “Anyone can find themselves in financial difficulty, and the rising cost of living means more people will struggle to make ends meet.

“If you’re struggling financially the most important thing is to speak to someone. If you’re worried about keeping up with payments, talk to your lender as soon as possible, as they could offer affordable options to pay back what is owed.”

Debt advice charities such as StepChange or Turn2Us are also independent and free of charge, and making contact will not damage – or even be visible – on your credit file.

economic outlook

The FCA’s advice has coincided with a Bank of England report, also published today, which warns that people with high levels of debt will find themselves ‘most exposed’ to further price rises of essential goods such as food and energy – especially if costs continue to climb faster than expected, or it becomes more difficult to borrow.

The Bank’s Financial Stability Report found that day-to-day living costs have risen sharply in the UK and across the rest of the world, while the outlook for growth has worsened.

It points the blame largely at Russia’s illegal invasion of Ukraine; both countries produce significant proportions of the world’s wheat supply, along with other staples such as vegetable oil, resulting in high food prices and high levels of volatility in the commodity markets.

The Bank said that ‘like other central banks around the world’ it has increased interest rates to help slow down price rises. However, costs are still soaring with annual inflation – 9.1% for May – at the highest level for 40 years.

Combined with tightening borrowing conditions, repaying or refinancing outstanding debt will become harder, said the Bank. It expects households and businesses to become further stretched in the next few months, while being ‘vulnerable to further shocks’.

Both reports land against the backdrop of a political crisis in which two of the Government’s most senior cabinet members – the Chancellor of the Exchequer, Rishi Sunak and Health Secretary, Sajid Javid – both resigned over lack of faith in the Government’s leadership.

Former education secretary, Nadhim Zahawi has now taken up the reins as Chancellor but will inherit ongoing problems including soaring oil, energy and food prices as well as the plummeting value of the pound.


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