The FCA principle 12 is the Financial Conduct Authority's latest addition to its existing framework, introduced under the Consumer Duty. It places a direct responsibility on regulated firms to deliver good outcomes for retail customers — going beyond previous principles by shifting the focus from process and conduct alone, to the actual outcomes customers experience.
This article covers what Principle 12 of Consumer Duty is, when it came into effect, and what firms need to do to comply.
The 12th FCA Principle of Business Explained
A new Consumer Duty principle has been included in the Financial Conduct Authority’s latest update.
This brings the total to 12 principles that guide how firms in the financial industry operate. With the FCA Principle 12 having come into effect 31st July 2023, are you acquainted with its finer details?
What Are the 11 Principles of Business?
The FCA Principles for Business are outlined by the FCA in order to guide the fundamental standards of regulated firms. The FCA principles touch on customer relationships, management systems, and the conduct of the firm – central to these principles is the ethos of treating customers fairly.
By abiding to the 11 principles, firms can be sure they are adhering to the policies of the FCA and avoiding penalisation.
We've written an article explaining the 11 Principles of Business, what they are, and their importance to firms. Click here to learn more.
Consumer Duty: Bringing in a New 12th Principle of Business
In July 2022, the FCA published the Consumer Duty PS22/9. This latest release of the Consumer Duty for firms introduced FCA Consumer Duty Principle 12, which states: “A firm must act to deliver good outcomes for retail customers.”
When Will the New 12th Principle Come Into Effect?
The 12th principle came into effect on 31st July 2023 for products which are available for sale, marketing and renewal. For products which are not available for sale, marketing and renewal, otherwise known as closed products, the date this principle came into effect is 31st July 2024.
What is Principle 12 of Consumer Duty?
Consumer Duty Principle 12: "A Firm Must Act to Deliver Good Outcomes for Retail Customers."
FCA principle 12 touches on the responsibility of firms in ensuring the outcomes they produce for customers will help retail customers achieve their financial objectives.
This is enforced by cross-cutting rules, which outline acting in good faith, avoiding foreseeing harm, and enabling and supporting customers to pursue their financial objectives as means of achieving the 12th principle.
Firms Are Now Required to Comply With Principle 12 to Be FCA Compliant
Like the current 11 principles, firms are now required to abide by the 12th principle in order to be FCA compliant. This includes monitoring customer outcomes and further taking measures to improve products and services to make certain good outcomes are being achieved.
How Will the Consumer Duty and the 12th Principle of Business Provide Better Consumer Protection?
Consumers will be better protected by Consumer Duty Principle 12 as firms are encouraged within this to provide an honest and informative service for consumers to achieve a good outcome. This will help consumers make more suitable financial decisions based upon their objectives and minimise a firm's ability to exploit consumers for financial gain.
What Challenges May Firms Face in Implementing the New Consumer Duty?
Implementing fca principle 12 may have required an overhaul of the current systems and processes undertaken by a firm to account for increased monitoring of consumer outcomes, as well as improved products and services. It will require transparency and communication across the distribution chain to facilitate this, alongside ongoing assessment of customer outcomes and support; this ultimately will have to be fed back to the FCA.
With FCA Principle 12 now in effect, firms are required to ensure they are delivering good outcomes for retail customers across all areas of their business. For dealerships, this includes ensuring products such as finance options and add-ons like GAP insurance are presented correctly and fairly to customers.
At ASUK, we provide FCA compliant software designed to help dealerships deliver compliant sales processes, supporting firms in meeting the good customer outcome requirements set out under Principle 12.
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