On July 17, 2018, the FCA published its Approach to Consumers alongside a discussion paper on the potential introduction of a new duty of care and possible alternative approaches. The Approach to Consumers forms part of a series of formal approach documents explaining the FCA's approach to regulation in more depth. It should be read alongside the FCA's Mission document, which was first published in October 2016 and most recently updated in November 2017.

The Approach to Consumers sets out the FCA's approach to regulating for retail customers. The document sets out the FCA's vision for well-functioning markets that work for consumers, the relevant regulatory and legal framework, when and how the regulator will act to protect consumers, the FCA's policy position on key issues and its strategy for ensuring that its consumer protection objective is advanced with the greatest impact.

One of the key issues concerns the approach to vulnerable consumers. The FCA has a supervisory expectation that firms will take reasonable steps to identify vulnerability and take appropriate action upon identifying vulnerable customers. The FCA expects firms to take note of indicators of potentially vulnerable customers and to have policies in place to deal with consumers who may be at greater risk of harm. The FCA intends to consult early in 2019 on guidance for firms on the identification and treatment of vulnerable consumers. The aim of the guidance will be to explain the FCA's expectations and to assist firms to fulfil them. The FCA also intends to hold events later in 2018 to identify the difficulties firms have in dealing with vulnerable consumers and to highlight best practice in identifying and assisting these consumers.

The discussion paper considers whether there is a need to introduce a new duty of care for all financial services firms. The FCA has been given opposing views on this topic and the feedback to the discussion paper is intended to assist the FCA in determining whether:

  • there is a gap in the U.K.'s regulatory and legal framework or the way it is applied and if there is, whether a new duty would remedy the situation;
  • a change in the existing framework is desirable, what form it might take and how it would work in practice, including the impact of any changes for consumers, firms and the FCA;
  • alternative approaches might better address the concerns; and
  • a new duty of care would improve conduct and culture in financial services and influence consumer outcomes in the context of the SM&CR.

Feedback to the discussion paper should be provided by November 2, 2018.

The Approach to consumers is available at: https://www.fca.org.uk/publication/corporate/approach-to-consumers.pdf  and the discussion paper is available at: https://www.fca.org.uk/publication/discussion/dp-18-05.pdf.

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