Consumer Duty
With the Financial Conduct Authority implementing a new Consumer Duty for 2023 and 2024, regulated firms within the financial market must educate themselves on the updated principles in order to stay competitive in their field and adhere to the regulations of the FCA.
What Is the New Consumer Duty?
The new Consumer Duty introduced by the FCA proposes stricter standards for the treatment of customers by firms within the financial market, which includes firms in the automotive dealership industry. More specifically, consumers are entitled to clear and comprehensible communication, products and services which fulfil their requirements and provide fair value, and that they are provided with an appropriate level of customer support whenever they should need it.
As evidenced in the Consumer Duty PS22/9 (policy statement 2022), the new Duty will apply to a range of bodies. This is outlined by the FCA to include: FCA regulated firms; consumers and consumer organisations; industry trade associations; industry policy makers and regulatory bodies; industry experts, commentators, and academics; and research institutes.
The stricter and higher standards set out by the FCA in their Consumer Duty requires firms to be able to innovate and evolve in order to meet the needs of their customers and continue to adhere to FCA regulations.
The FCA believes the new duty will not only be in the best interest of consumers within financial markets but promote healthy competition and growth of the industry as the outcomes for Consumer Duty obligations.
The 4 Major Outcomes for Consumer Duty
The FCA hopes there will be 4 major outcomes for the updated Consumer Duty regulations.
Consumer Understanding
Consumer Understanding is one of the fundamental outcomes that financial firms must achieve. The aim here is to ensure that all information provided to consumers is presented in a clear, fair, and non-misleading manner, allowing them to make well-informed decisions.
As an automotive dealership, you should provide comprehensive information about financial products such as vehicle financing, extended warranties, and service contracts, to your customers. At Automotive Systems, we are here to help you simplify these processes with our bespoke software solutions which are FCA compliant. You should ensure that complex terms are simplified and key details are clearly highlighted, helping your customers fully understand the products or services they are considering. This outcome emphasises the importance of transparency in marketing communications and contract terms, ensuring that consumers are empowered to make decisions that suit their needs.
Products and Services
The Products and Services outcome is centred around ensuring that the products and services offered meet the needs, characteristics, and objectives of customers within the target market. At Automotive Systems, we create bespoke software solutions that ensure simplicity when it comes to FCA compliance, helping you deliver products and services that meet the needs and objectives of your customers.
FCA compliance requires a thorough understanding of target markets and careful product alignment, preventing consumers from being offered products that may be unsuitable for their financial situation or needs. By designing and delivering products that serve the best interests of customers, dealerships can significantly enhance consumer trust and satisfaction.
Price and Value
Price and Value is an important outcome focusing on the fairness of pricing relative to the benefits received by the consumer. The FCA expects firms to ensure that all products and services provide fair value, meaning that the price charged to the consumer is proportionate to the quality and benefits provided.
This could involve evaluating the pricing of add-ons, such as gap insurance or service plans, ensuring that these offerings genuinely add value to your customers' experience. Our solutions can assist you in evaluating and maintaining fair pricing standards. Fair pricing plays a vital role in building long-term relationships with customers and enhancing brand loyalty. Moreover, dealerships need to monitor customer feedback and market trends to validate that their pricing strategy remains competitive and fair.
Consumer Support
The final outcome is that consumers should be able to better access services and products of the financial market, with greater customer support, communication, and treatment.
The final outcome, Consumer Support, is about ensuring that consumers receive adequate support throughout their customer journey. This includes providing timely assistance, clear complaint procedures, and effective channels for communication. As a business you must ensure that customers can easily access information, make enquiries, and receive support at any point during their interaction with your business.
Whether it's during the initial sale or later stages involving after-sales services, consumer support should be readily available, responsive, and helpful. This outcome is pivotal in reducing consumer frustration, minimising complaints, and fostering a positive customer experience.
When Will the Consumer Duty Come Into Force?
When the new Consumer Duty will come into force depends on the status of the firm’s products and services. The FCA has stated that new and existing products and services that are open to sale or renewal will be subject to the new Consumer Duty from 31st July 2023.
Closed products and services will be subject to the new Consumer Duty from 31st July 2024. The finalised guidance for the duty, presented as Consumer Duty FG22/5, offers guidance for firms in preparation of the duty coming into force, including how firms should comply with the new regulations.
You can contact us here at Automotive Systems for more information.
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