What do we know so far about the new FCA Consumer Duty Act and how will it ensure vulnerable customers are protected?
Consultation ended on February 15th for the FCA’s (Financial Conduct Authority) new Consumer Duty Act, with the rules set to be finalised in July 2022.
This new act aims to protect vulnerable customers as FCA research shows us that (pre-pandemic) 46% of adult customers displayed characteristics of vulnerability at any given time, a percentage which has only risen following to COVID-19 pandemic.
The FCA is concerned that current financial services aren't always in the customers best interests and that they are often exploiting the large percentage of vulnerable customers through harmful practices. Through their past interventions, the FCA have found businesses presenting information in a way that exploits the behavioural biases of their customers, selling products or services that are not necessary or fit for the intended purpose, and creating a habit of all-around poor customer support.
This new Consumer Duty Act is intended to combat that by fundamentally altering the mindset of businesses on a larger scale and ultimately aiming to provide a far better degree of protection to these vulnerable customers from predatory practices, in turn preventing any harm before it occurs - always a good thing for customers and businesses alike. The implementation of this process is stated to be "iterative" by the FCA and they will be frequently interacting with businesses to determine good practice by examining reviews and the applications of products and services.
The act will attempt to push these businesses to start putting the customer first. This means focusing on providing helpful and genuine support, ensuring the total comfort of their customers so they feel able to make safe and correct financial decisions during all interactions with a business. Businesses will now have to provide customers with transparent information that they can easily comprehend and only offer products and services that fit the customer's needs.
To achieve the shared goal of customer protection there are a few changes that will be taking place, so it is important to understand what they are and what it means for your organisation.
Due to this act, there will most likely be a big change in culture within financial organisations. Because the customers need to be at the heart of what we all do, senior managers will need to be held accountable if it's found that customers are still being exploited in some way. The act will also push the quality of products and services so that customers’ needs are sufficiently met, this approach should in turn create a lot of healthy competition between businesses as they strive to provide consistently high quality for their customers.
Something worth noting that accurately sums up the situation is the wording of the language used when this topic has been discussed. "Deliver good outcomes for clients" is the key takeaway from the FCA’s current information available.
Whilst the detailed rules are yet to be announced, it's clear that there's a shift towards providing the customer with more power. Rather than a business acting upon the consumers’ behalf it will now be up to the customer to choose whether they accept the outcome that has been delivered to them.
It is in this position that the customer is made least vulnerable and therefore less likely to be exposed to potentially harmful practices that have been used to increase profits without fully considering the customers’ experience.
There are a number of areas within this shift from the FCA where AI learning and modern technology offers a helping hand:
By implementing these features and services into a business the safety of the customer becomes more assured.
At TMAC we want to make every customer conversation valuable, and we believe human to human interactions augmented with AI will provide the best experience. Win back control of your conversations and solve real problems with our three contact centre solutions (Listen, Act & Learn), that put your customers front and centre by helping you listen to them, act on their preference, and coach your teams to success.
Want to chat about how we can help your business? Drop us an email at email@example.com.
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