FCA Business Plan 2021/22: Consumers

• United Kingdom

• Financial services
• Financial services - Payment services
• Financial services - Retail finance

02-08-2021

The FCA's Business Plan 2021/22 sets out its priorities for the next year and is arranged into four key themes: Change, Consumers, Wholesale and All Markets. Read our full summary of the FCA Business Plan 2021/22 >

Enabling consumers to make effective investment decisions

The FCA believes it can better improve firms’ conduct when consumers are informed and empowered to choose the right products and services for them, at the right price.  The FCA notes that continued low interest rates and increased uncertainty are driving consumers to seek higher yields from risky and often unsuitable investments.

Among the outcomes the FCA wants to achieve by its three year Consumer Investment Strategy are:

• More consumers who want to save long-term considering investment opportunities
• Fewer consumers with higher risk appetites holding more than £10,000 in cash
• Fewer consumers with preferences for low-risk investments or vulnerable consumers investing in high-risk investments

Amongst other approaches, the FCA plans to achieve these outcomes by strengthening the financial promotion rules for high-risk investments and authorised firms that approve financial promotions by:

• improving the classification of high-risk investments
• segmenting the high risk market
• increasing the responsibilities of firms which approve financial promotions

Currently any authorised firm can approve financial promotions for unauthorised persons regardless of whether the authorised person has experience and expertise in the product or service promoted.  HMT’s proposed new regulatory gateway will require authorised firms to have a proper understanding of the relevant underlying products when approving financial promotions by unauthorised persons.

Financial Services Product Group Head, Partner Michaela Walker, comments:

“The FCA wants to be a partner for firms seeking to develop and grow the investment market.  Appropriate regulation of asset managers, which recognises and supports good behaviours while driving out sharp practices will help grow the sector.  However, as always, the devil is in the detail, and excessive costs of compliance can be as injurious to competition and consumer interests as poor behaviour by firms.”

Ensuring consumer credit markets work well

The FCA continues to prioritise the fair treatment of borrowers, ensuring firms provide better outcomes by enabling them to make informed choices and providing affordable product that meet their needs.  It remains committed to stamping out poor practice and encouraging competition. 

Consumer Finance Partner, Naomi Seward, comments:

“We have already seen increased levels of regulatory intervention and enforcement and expect this trend to increase, with more extensive information requests requiring clear evidence that firms are delivering fair customer outcomes.  Like many, we keenly await the new rules for the buy now, pay later (“BNPL”) sector, but it is clear that the authorisations benchmark is increasing and the expectations of authorised firms continue to rise.”

Making payments safe and accessible

Through the continued evolution of the payment services sector the FCA hopes to see a wide variety of payment services provided to consumers and small businesses alike.  At the same time it is cognisant of the risks posed by innovation including those associated with crypto assets.  The FCA is therefore taking a multi-pronged approach to achieving safety and accessibility to payments.  This includes pro-actively reviewing firms’ safeguarding arrangements and wind-down planning and identifying at-risk firms, closely supervising bank branch closures and working with Government and industry participants to maintain access to cash. 

International Payment Services Partner, Tony Anderson, comments:

“The FCA has been quite unequivocal in warning the public of the potential risks associated with crypto assets including the possibility of losing everything.  Other risks recently highlighted have been those associated with payment and e-money firms (such as Wirecard) with deposits not being protected by the Financial Services Compensation Scheme.  Pro-actively monitoring them to ensure such funds are appropriately safeguarded is a welcome step.”

Delivering fair value in a digital age

The FCA sees firms delivering fair value as the key to achieving both competition and consumer trust in financial services.  It aims to ensure all consumers, especially the vulnerable, have fair access to key, good value products and services, and will deliver this through a combination of the implementation of its pricing and automatic renewal remedies in January 2022, the development of  a digital markets strategy and continued investigation of harmful business practices.

Consumer Finance Partner, Naomi Seward, comments:

“Over recent time we have seen the FCA’s understanding of the financial dynamics of the different elements of this market increase significantly, largely as a consequence of its sophisticated analysis of business models and use of behavioural economics.  Armed with this evidence based information, it is growing in confidence to be able to use its competition powers to proactively regulate on pricing.  We anticipate this tend increasing, particularly through the implementation of fair value in the new Consumer Duty.”

The new Consumer Duty

The FCA has reaffirmed its commitment to introducing a new Consumer Duty, which it hopes will achieve better outcomes for consumers because firms will consistently put customers’ interests at the centre of their business.

Financial Services Disputes and Investigations, Partner Claire Carroll, comments:

“It’s no surprise to see the FCA’s firm commitment to follow through on the new Consumer Duty which is currently under consultation.  The FCA clearly considers that firms are not putting customer interests at the centre of their business, and aims to set some clear expectations for firms as to the required standards.  Unfortunately the New Consumer Duty will have no impact on the high risk products that are not subject to FCA regulation (e.g. London Capital and Finance), which have caused real harm to consumers over recent years.”

See our client briefing “The FCA signals “paradigm shift” in expectations of firms in retail markets with its consultation on a New Consumer Duty (CP21/13)”.