Consumers have better personal finance protection from today as tough new ‘consumer duty’ rules come into force.
Consumer duty rules say financial firms have to give their customers clear information, helpful customer service and deals offering fair value that meet their needs.
These rules have to be followed by all firms regulated by the Financial Conduct Authority (FCA) regulator, which came up with the new regulations.
If financial firms break the rules they can be fined by the FCA.
Finger on the pulse: Customers will have a new weapon to add to their armoury when they take up a fight with financial firms over shoddy service or unfair prices
But the good news is that, from today, customers will have a new weapon to add to their armoury when they take up a fight with financial firms over shoddy service or unfair prices.
Here, we reveal what the plans mean for you and how your rights are changing.
It should be easier to make a complaint
Companies will be required to provide helpful information to customers and offer products that work as expected.
If you are unhappy, you should also be able to switch or cancel your accounts and services as easily as you purchased them.
Rocio Concha of campaign group Which? says: ‘If consumers find that a firm is falling short of these new standards and they want to make a complaint, they should raise this with the company directly.’
Companies will be held to a higher standard, so if you complain and feel they are falling short of the new rules, you can quote ‘consumer duty’.
Higher standard: The new Consumer Duty should force finance firms to provide products that work as described – and make it easier for customers to complain when they don’t
Savers should be given better rates
High street banks are under fire for failing to pass on higher rates to savers. But under the new guidance, banks are required to offer customers ‘fair value’ and will need to justify their rates – or face punishment.
Banks will also have to tell savers when a better interest rate is available. This means more savers will be aware that their money might be languishing in accounts with paltry returns.
The plans also aim to make it easier to switch accounts by ensuring exit fees on fixed-term savings products are ‘proportionate and reasonable’.
> Find the best savings rates using This is Money’s best-buy tables
A handful of banks and building societies have already made changes to ensure they comply with the new rules.
This month, Santander extended its online-only eSaver and eIsa to customers who want to bank in branch or by phone.
Until now, it reserved its top-paying deals for those who bank online. Other high street banks are expected to follow and extend online-only accounts to all customers, so more people can access the best rates.
Firms can’t charge ‘unjustified’ fees
Companies will no longer be able to charge ‘unjustified’ fees disproportionate to the returns. This means you should not be charged unreasonably high fees to maintain an account that does not return a profit.
Insurers should also offer customers products that meet their needs, says Sheldon Mills, executive director of consumers and competition at the FCA.
In a recent speech he said customers should be able to ‘invest in their future knowing firms are providing them with the right products for their needs’.
Sheldon Mills: FCA executive director for consumers and competition has said finance firms need to offer their customers products that meet their needs
Insurers must show how they calculate premiums
Last year, the City watchdog outlawed a devious pricing strategy used by some big insurers called the ‘loyalty penalty’. Insurers would routinely charge existing customers more than new ones, in a bid to lure new business.
The guidance coming in tomorrow should go one step further, by forcing insurers to show how they calculate their premiums.
The rates offered will need to provide ‘fair value’ and not take advantage of vulnerable customers or those on low incomes.
Customers will also get more clarity when they make a claim, as insurers will have to give a suitable reason if a claim was unsuccessful.
However, there are fears that insurers are falling short of these standards just days before they come into force.
More than three in four car insurance customers in the UK say their provider did not give an explanation why a claim was rejected, partially accepted or disputed, according to research by Which?.
Historically, such lack of explanation has made it harder for drivers to mount a challenge or take a complaint to the Financial Ombudsman Service. In theory, the rules could mean more car insurance appeals will be successful, says Scott Dixon of The Complaints Resolver.
He adds: ‘The consumer duty sets a higher standard for firms, so consumers will have a better chance if appealing a rejected claim. But they will still need to lodge robust claims and stick to their guns if they believe they have been unfairly treated.’
