Conor D’Arcy, Head of Research and Policy, Money and Mental Health

The FCA’s Consumer Duty could be transformative for people with mental health problems

7 December 2021

At Money and Mental Health, we all too often hear from people with mental health problems who’ve had bad experiences with banks, credit card companies and other financial services firms. When things go wrong, this can have both major financial and psychological impacts for those affected. That’s why it’s welcome that the Financial Conduct Authority (FCA) – the body that regulates those companies – is seeking to improve outcomes for consumers through a new Consumer Duty, with its updated plans published this morning.

Today’s paper puts more skin on the bones of the initial proposals the FCA made back in May. At 243 pages, it’s a detailed piece of work which we’ll be poring over and responding to in more detail. But even a quick skim through shows a good understanding of the harm that some customers are facing as a result of poor practice from firms, and the ambition to tackle that. 

The importance of outcomes for customers with mental health problems

Lots of the issues raised in the paper are ones our Research Community – a group of thousands of people with lived experience who feed into all our work – have flagged. Products that are designed, marketed and managed without properly considering the needs of customers can lead to people being confused, distressed and worse-off financially. Our research has consistently shown that people with mental health problems are at greater risk of such poor outcomes, so efforts to raise standards across the lifecycle of a product or service should be of particular benefit. 

It’s also welcome that the previous work the FCA has done on vulnerability, including mental health problems, hasn’t been forgotten. The paper sets out that last year’s guidance on vulnerable customers still applies and not meeting it would likely be a breach of the new Duty. For organisations seeking to take action now, our Mental Health Accessible programme walks companies through what they need to make their services really work for customers with mental health problems.

A common response from firms to both the vulnerability guidance and the previous paper on the new Duty was a request for more examples and specifics. Today’s publication includes examples of good and poor practice that should be a helpful guide. Similarly on monitoring, the update sets out the sorts of questions and data the FCA will be expecting firms to collect and use in their work.

Proof in the pudding when it comes to enforcement

While full of promising intentions, the biggest question mark over the previous proposals was what the real impact will be. The updated paper provides more information on how the FCA will enforce the Duty. It will be a core part of its standard supervisory work, in which its staff examines how firms are acting. But the new requirement for firms’ boards to regularly assess whether it is delivering good outcomes for its customers should demonstrate to companies how seriously they need to take this. 

While all the right signals are being sent, ultimately what will determine whether or not the Duty succeeds in improving outcomes for consumers is how firms take action. This is not the first effort the FCA has made to tackle harms in the markets it regulates and it’s had mixed success in the past, so its actions when these rules come into place in April 2023 will be crucial.

The right to redress for consumers

Finally, one of the most contentious parts of the previous paper was in relation to a “private right of action”, allowing individual customers who have lost out as a result of a firm breaching FCA rules to take legal action. The FCA has decided not to proceed with this, in part because there are already routes for people to seek redress. Taking a provider to court would be daunting for most people, let alone someone experiencing poor mental health, so we are hopeful that the new Duty will prevent much of the harm seen today. But being able to seek redress when something avoidable has gone wrong is still vital. Unfortunately that is currently too difficult because of long waits to have a case considered by the Financial Ombudsman Service and the practical difficulties involved, particularly for people with mental health problems. While fixing this is not entirely within the FCA’s powers, a better-resourced and easier-to-use redress system should be a key part of a fairer financial market. 

This is a significant step forward for the FCA that should lead to improved outcomes for all customers, including those with mental health problems. We look forward to getting into the detail of the proposals in the weeks ahead.