The UK’s financial watchdog has announced plans to bring in a new Consumer Duty to fundamentally improve how firms serve customers, giving firms 12 months to implement these new guidelines on all existing products and services that are currently being offered.

The Financial Conduct Authority (FCA) said that the duty is made of overarching principles and new rules, which would require firms to communicate in a way consumers can understand, offer products and services that meet their needs, offer fair value while providing customer support.

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With the focus on customer needs and clarity on FCA’s expectations, firms could achieve the flexibility to compete and innovate, said the FCA, which hopes to be a more ‘assertive and data-led regulator’.

The rules would require firms to end rip-off charges and fees, make it easy to change or cancel products, and provide customer support.

The firms will also be required to provide clear and timely information about products and services to help customers make informed financial decisions and offer products and services that are right for them.

Furthermore, the firms will have to focus on the diverse needs of customers including those who are vulnerable.

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FCA executive director of consumers and competition Sheldon Mills said: “The current economic climate means it is 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.”