The UK’s Financial Conduct Authority (FCA) has today announced a major change in how it regulates financial service firms, outlining measures to end “rip-off” fees and ensure fintech companies provide “clear” information to consumers.
The financial watchdog confirmed it will bring a new “Consumer Duty” into effect, with the goal of increasing the level of consumer protection from finance companies.
The duty will require financial firms such as fintechs to increase customer communication, reduce “unfair” costs and prices of products, and improve the standard of customer support.
The new requirements include ending “rip-off charges” and will compel companies to provide clearer information to ensure consumers understand the true financial implications and consequences of products.
The lack of clear communication around financial products has faced significant criticism from regulators, particularly in high-growth financial technology sectors.
Buy now, pay later (BNPL) has long been criticised for misleading customers by not clearly stating the debt and credit risks of the service.
Cryptocurrencies are another area that has frustrated the regulator, which has repeatedly warned of its risks. The push toward the regulation of these sectors has been a consistent goal for the FCA.
The duty is part of a wider aim of the FCA, which intends to become a “more assertive and data-led regulator”. It will assess if finance firms are meeting the customers’ needs and take action against practices it deems unfair.
“The current economic climate means it’s more important than ever that consumers are able to make good financial decisions,” said Sheldon Mills, the FCA’s executive director of consumers and competition.
“The financial services industry needs to give people the support and information they need and put their customers first.”
Mills claimed that the duty will cause a “major shift in financial services and will promote competition and growth based on high standards”.
He added: “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.”
Sam Seaton, CEO of Moneyhub, an open data money management app, said the Consumer Duty “presents an alarming array of demands and challenges, but it also presents an even broader array of opportunities” for fintechs.