New Consumer Duty rules to benefit small business owners

The Financial Conduct Authority (FCA) has launched a new set of rules called Consumer Duty. These are designed to heighten customer protection when dealing with financial service companies, with protections in place for small business owners.

Consumer Duty aims to set a higher standard of consumer protection from financial services such as pensions, investments, savings, credit cards, loans and mortgages.

This is positive news for SMEs who have been struggling with the recent volatile market conditions. Under the Duty, financial service companies must be open and honest, avoid harm, and support consumers to pursue financial goals.

Principles of the Consumer Duty rules

The Consumer Duty legislation seeks to protect consumers of financial products such as loans or credit cards – this includes protections for small business owners. Its overarching key goals include:

1. Helpful and accessible customer support, so it’s as easy to sort out a problem, or switch or cancel a product;
2. Timely and clear information that consumers can understand so they can make good financial decisions – this means important information can’t be buried in long and complicated terms and conditions;
3. Providers to offer products and services that are right for the consumer in particular, rather than pushing products and services that they don’t need or aren’t relevant;
4. Products and services should provide fair value, meaning there shouldn’t be unexpected costs to pay;
5. Companies must consider if the consumer is in a vulnerable situation. This could be due to poor health or financial troubles.

FCA research found that 7.4M people unsuccessfully attempted to contact one or more of their financial services providers in the 12 months before May 2022.

Less than half of UK adults said they had confidence in the UK financial services industry, and just 36% agreed that most financial firms are honest and transparent in the way they treat them – although the picture was more positive when asked to rate their own providers.

Benefits of Consumer Duty for business owners

The new practices mean small business owners should be treated better when accessing – or attempting to access – financial services that are relevant to their operation, like credit cards, loans and business mortgages.

It could also help businesses that may be vulnerable to online scams, and those struggling to pay unexpected price hikes – the latter thanks to the need for firms to offer ‘fair value’ under Consumer Duty.

Commenting on the introduction of Consumer Duty, Romi Savova, chief executive of PensionBee, said: “As a pension provider that fights for the rights of savers, we welcome this new regulation from the FCA.

“Our duty to consumers is well embedded in our approach to doing business, and we hope the new Consumer Duty will improve standards for UK consumers by offering all financial service providers a helpful framework to evaluate their services.”

The rules apply to all new and existing products and services that are currently on sale. For older products that are no longer on sale, Consumer Duty will apply from 31 July 2024.

Kirstie Pickering - business journalist

Kirstie is a freelance journalist writing in the tech, startup and business spaces for publications including Sifted, TNW, UKTN, The Business Magazine and Maddyness UK. She also works closely with agencies such as CEW Communications to develop content for their startup and scaleup clients.

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