The United Kingdom’s Consumer Duty rules for financial services firms have come into effect today (Monday). Considering this, companies registered with the Financial Conduct Authority must align their services to abide by the rules to ensure consumer protection. These rules will apply to payment firms, asset managers, insurance firms, brokers, and more, covering about 60,000 companies. But, are they prepared?

UK Firms Must Comply with Consumer Duty Rules

In an industry-wide survey of over 1,000 regulated financial services companies, the FCA found that a third of the participants would not be compliant with the new rules by the deadline. When it comes to forex and contracts for differences (CFDs) brokers, only 61 percent would meet all the requirements, whereas a further 30 would meet only some of the rules.

The complaint figures for the FX/CFDs industry are much higher than the others.

However, the entire British financial services industry will need to be compliant with the 121 pages of guidance. In short, these rules are focused on delivering “good outcomes” to retail customers.

Ask Yourself Some Basic Questions

According to the FCA, when deciding on products and services, firms need to ask themselves some basic questions, including “Am I treating my customers as I would expect to be treated in their circumstances? [and] Are my customers getting the outcomes from my products and services that they would expect?”

In an interview with Finance Magnates, the FCA elaborated that it would take assertive action against violators of the consumer duty rules by identifying harm to consumers. It will also prioritize serious breaches and take “robust action, such as interventions or investigations, along with possible disciplinary sanctions.”

However, one of the major concerns around the implementation of consumer duty is the costs. According to Reuters, firms need to spend an estimated one-time amount of GBP 2.4 billion ($3.1 billion) to implement the Consumer Duty rules. Because of the hefty cost, the industry is divided about its long-term cost-effective benefits.

Initially, the FCA proposed the Consumer Duty in 2021 but only published details of the rules last year. Though the rules are already applicable to products open for sale and renewal, products no longer on sale will have just 12 more months to comply with the deadline of July 31, 2024.

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