Key Take-Aways

• This is first of three papers linked to the FCA’s Mission, with others covering Competition and Market Integrity. It is perhaps no coincidence that this is first to land as consumer protection has always been at the forefront of FCA thinking.
• The Mission outputs repeatedly make it clear that the FCA has finite resources and therefore needs to provide more protection to those consumers who need it most (rather than all) – this is an important departure from previous FSA/FCA thinking and represents a material change in focus and approach to consumer protection.
• The approach has been influenced by the results of the 2017 Financial Lives Survey, published 18th October.
• The FCA mentions its approach “will be based on what we know about how consumers really behave rather than theory” – this is a nod to focus on outcomes and principles rather than just rules and also confirms the importance the FCA places on evidence from behavioural science about consumer bias and behaviours.
• The paper also reemphasises a point the regulator has made before about its expectation for consumers to take reasonable responsibility for their choices and decisions (Principle four of Principles of Good Regulation). This feels like an important shift in thinking for the FCA and is something Andrew Bailey has repeatedly made reference to throughout the Mission process.
• A lot is made in the paper about “Choice Architecture” i.e. the way in which information is framed for the customer. Firms will need to think about what this means for the way they communicate and position information to enable consumers to make good decisions.
• It is noted that 7.7m UK Adults are over-indebted (i.e. keeping up with commitments is a heavy burden and/or domestic bills have been missed in three of last six months), which is a call out to say that debt is clearly a high priority for the FCA.
• While potential benefits of technology are acknowledged there is also genuine concern that there is a risk this will not support or benefit all consumers and some may be left behind. There are a number of references to financial exclusion and this is clearly one of the tenets of the future approach i.e. to monitor and try to minimise the exclusion of certain market participants.
• Vulnerability is a key theme and acknowledgement is made of the fact that whilst many may be potentially vulnerable this should not exclude them from the same options as everyone else.
• There is reference to the potential introduction of a new Duty of Care for firms - this is acknowledged but suggested that it is best addressed post Brexit i.e. it is on the FCA’s agenda and likely to feature in 2019.