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Francesco Fulcoli - Chief Compliance Officer
Consumer protection is of utmost importance in the financial services industry, particularly for payment institutions and Electronic Money Institutions (EMIs). The Financial Conduct Authority (FCA) has introduced the Consumer Duty Plan to enhance consumer outcomes and establish clear expectations for these entities. This article provides a detailed overview of the Consumer Duty Plan, specifically tailored for payment institutions and EMIs, outlining its implementation strategies and the FCA's expectations for these organizations.
Understanding the Consumer Duty Plan for Payment Institutions and EMIs
The Consumer Duty Plan is a comprehensive framework designed to protect consumers from potential harm caused by financial services firms. For payment institutions and EMIs, the plan emphasizes specific considerations to ensure consumer welfare. The key elements of the Consumer Duty plan relevant to these entities include:
Implementation Strategies for Payment Institutions and EMIs
To implement the Consumer Duty plan effectively, payment institutions and EMIs should consider the following strategies:
FCA Expectations for Payment Institutions and EMIs
The FCA has set specific expectations for payment institutions and EMIs regarding the Consumer Duty plan. These expectations include:
The Consumer Duty plan sets clear expectations for payment institutions and EMIs to prioritize consumer welfare. By adhering to the duty of care, skill, care, and diligence, and practicing transparent communication, these entities can build trust, enhance consumer outcomes, and contribute to a fair and secure financial services ecosystem. Embracing the Consumer Duty plan not only protects consumers but also strengthens the reputation and credibility of payment institutions and EMIs in the marketplace.
Consumer Duty and Vulnerable Customers: Enhancing Protection and Support
In the realm of consumer protection, the concept of the Consumer Duty is closely intertwined with the need to safeguard vulnerable customers. Vulnerable customers are individuals who, due to personal circumstances or characteristics, are more susceptible to harm or exploitation in their interactions with financial services providers.
Vulnerable customers encompass a wide range of individuals who may face difficulties or disadvantages when engaging with financial services. Vulnerability can arise from various factors, including physical or mental health conditions, age, low literacy, low income, or life events such as bereavement or divorce. It is essential to recognize and address the unique challenges faced by vulnerable customers to ensure their financial well-being.
The Intersection of Consumer Duty and Vulnerable Customers
The Consumer Duty plan explicitly acknowledges the significance of protecting vulnerable customers. It requires financial services firms to adapt their practices and provide tailored support to meet the specific needs of these individuals. The following key considerations highlight the intersection between the Consumer Duty and vulnerable customers:
FCA's Approach to Vulnerable Customers
The FCA has emphasized the importance of addressing the needs of vulnerable customers and expects firms to implement the following practices:
The Consumer Duty and the protection of vulnerable customers are intrinsically linked. Financial services firms have a duty to recognize, support, and protect vulnerable customers by adapting their practices and offering tailored solutions. By integrating vulnerability considerations into their operations, firms can fulfil their obligations under the Consumer Duty, promote positive customer outcomes, and contribute to a more inclusive and compassionate financial services sector.
The Role of the Consumer Duty Champion
The Consumer Duty Champion is an individual nominated by the board to work closely with the Ceo and play a critical role in supporting and advocating for consumer rights and protection within the organization. The FCA does not outline specific expectations for consumer duty champions and is not a ‘prescribed responsibility’ under the Senior Managers & Certification Regime (SM&CR). Firms can set it up in a way that fits with existing roles and responsibilities on their Boards. They generally support efforts to:
While the specific expectations of consumer duty champions may evolve over time, their role in advocating for consumer rights and protection, and supporting the goals of the Consumer Duty, is generally regarded as important in promoting fair and transparent financial services for consumers and protecting them from any harm.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
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