FCA: Price and value are key to new consumer duty

Price and value are two of the most important factors of the new consumer duty, the Financial Conduct Authority (FCA) has said.

In a podcast called Inside FCA, head of competition policy Ed Smith explained that regulated financial services firms – including peer-to-peer lenders – have to ensure that there is a “reasonable relationship” between the price paid and the overall benefit consumers receive.

The four key outcomes of the new consumer duty include: the products and services outcome, the price and value outcome, the consumer support outcome and the consumer understanding outcome.

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However, Smith added that in the midst of the ongoing cost of living crisis, firms should be particularly mindful of price and value.

“Price and value is one of the core ones and essentially what it’s saying is that firms need to ensure that the price a customer pays for a product is reasonable compared to the overall benefits that the customer gets from the product,” he said.

“Often these examples of poor value are taking advantage, firms are taking advantage of behavioural biases that we as consumers have. So they can use, for example, flashy upfront discounts to hide the true cost of a product to a customer.

“Or they might try and attract customers at the point of sale through impulse add on products that they probably don’t really need and can represent poor value.”

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He advised firms to ensure that there aren’t any groups of end consumers who may be vulnerable to poor outcomes as a result of the products being offered. He added that this is “doubly important in hard times” and hinted that the FCA is prepared to crack down on those firms which do not take price and value seriously.

“Given the cost-of-living crisis in context, it’s really important that firms challenge themselves on whether the cost of the product is commensurate with the benefits that a customer receives,” Smith said.

“Firms really must factor this in both in their charging structures to ensure those charging structures are fair but also in another element of the consumer duty, and the support they give to customers that are facing very difficult circumstances.”

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