6.1 Fair Treatment Of Customers

Question 1

Treating customers fairly

Answer 1

• the marketing used to promote products and services
• monitoring the performance of the products and the ongoing service to customers after purchases
• design and pricing of the proud. To ensure it meet the needs of the target audience (product/ service priced fairly)

Question 2

Customers being treated fairly

Answer 2

Should see them as stakeholders and individuals.

Banks must keep records, monitor compliance and have plans and processes in place to deal with non compliance.

Drive good customer outcomes = good ethical culture and appropriate governance.

Question 3

Fair treating of customers

Answer 3

To ensure that the products and services offered by a bank is suitable for the customers and appetite to their risk profile.

Pricing is transparent
Service is delivered in a speedy, safe environment

Bank of Pakistan

Question 4

The EBA

Answer 4

promotes a transparent, simple and fair internal market for consumers in financial products and services

(European banking authority )

Question 5

All firms..

Answer 5

must be able to show consistently that fair treatment of customers is at the heart of their business model

Question 6

FCA has set out six customer outcomes as part of its fair treatment

Answer 6

1. Consumers can be confident they are dealing with firms with the fair treatment of customers is central to the corporate culture.
2. Product and services marketed and sold are designed to meet the needs of identified consumer groups and targeted accordingly.
3. Customers are provided with clear information and are kept informed before, during and after the point of sale
4. The advice is suitable and take account of customers circumstances.
5. Consumers are provided with products that perform and that service is what they been led to expect.
6. Customers do not face unreasonable post sale barriers to change product or switch provider.

Question 7

Delivering fair outcomes

Answer 7

With the development of technology and wider choice of products- consumers have difficult financial decisions to make.

Banks will always work to ensure their understand customers needs and to support them in selecting the right product or service that helps them achieve their financial goals.

To ensure that financial institution treat their customers fairly - financial regulators in most countries have set out rules of conduct that firms and their employees must comply with.

Question 8

Consumer duty

Answer 8

The FCA regulates financial services firms and financial markets in the UK.
- One of the main objectives is to protect consumers from harm caused by bad conduct and financial services.

Question 9

FCA introduced consumer duty in 2023

Answer 9

The duty sets the standard of care that firms should give to its customers in the UK.

New principle for businesses:
- a firm must act to deliver good outcomes for customers.

New conduct role for individualss
- Must act to deliver good outcomes for customers.

Question 10

Consumer duty applies to

Answer 10

• firms regulated by the FCA
• across all a firms activities
• the entire lifecycle of the product or service
• to prospective customer as well as customers who are already using the services
• across the full distribution chain

Question 11

The duty has three main component parts

Answer 11

1. A consumer principle.
2. Three crosscutting rules.
3. Four outcomes.

Question 12

Consumer principle

Answer 12

All people who work in the firm must act to deliver good outcomes for retail customers.

In making choices, consumers must have access to the info they require so that can make informed decisions for the products that are right for them.

Customer should trust the customer and that it offer fair value

Question 13

Three cross cutting rules

Answer 13

1. Act in good faith towards retail customers (being open and honest)
2. Avoid causing for foreseeable harm to retail customers
3. Enable and support retail customers to pursue their financial objectives (identifying their needs and communication well with them)

Question 14

Four outcomes

Answer 14

1. The governance of products and services (help customers choose product to fit for their purpose)
2. Price and value (fair value for their money)
3. Consumer understanding (supporting customers understanding of their information you give them).
4. Consumer support ( those with vulnerability and making sure that customers use products and services that they expected).

Question 15

Training and competence (TC)

Answer 15

Staff need to be trained and qualified to deal with customers.

Competence = employee has the knowledge and experience to carry out the responsibilities of the role. Behaving in an ethical way

Question 16

Reviewing competence and training needs

Answer 16

Is reviewed regularly
and take into account any changes in the economic, regulatory environment.

Reviews should include: skills, expertise, technical knowledge and behaviours

Question 17

Level of supervision

Answer 17

The level of supervision depends on the experience and current level of competence

Question 18

Supervisors

Answer 18

Must have the appropriate technical knowledge and be skilled in coaching

And be able to conduct the type of assessments needed to ensure that the people they supervise have maintained the skills needed in their role.

Question 19

Qualification requirements

Answer 19

Can be specific, including which qualifications are considered appropriate by the regulator and the time limit for achieving them.

Question 20

Record keeping

Answer 20

Must keep records on all training and compliance matters.

Example: records of staff recruitment, training, staff supervision etc.

These records must be reviewed by the regulator if they have any concerns about how the business is operating so that they can have a better understanding

Question 21

Lending standards

Answer 21

Banks core activities.

Important that lending is carried out in accordance with set standards both to treat customers fairly and to protect the bank from excessive risk.

The Banking practice code is based on the principle of fairness, transparency, accountability, and reliability.

Question 22

Standards of lending practise (personal customers)

Answer 22

Set out good practises in relation to overdrafts, credit cards, charge cards and other unsecured loan products.

• product and service design
• Product sale
• Account maintenance and servicing
• Money management
• Financial difficulty
• Consumer vulnerability
• Governance and oversight.

Question 23

Banks that sing up to the LSB (lending standards board) must ensure that their customer:

Answer 23

• receive info about lending products to allow them to choose a product that meet their needs
• assured that firms are committed promoting their products responsibly
• receive info on how to apply for a lending product
• providing reason if an application is declined
• provided with clear documentation and info regarding the rights and obligations of both parties during the lifetime of the products
• will be supported if they experienced difficulty in repaying their borrowing
• Will know what happens when they have repaid their borrowing or no longer require it

Question 24

Complaints handling

Answer 24

Bank employees must treat the customers fairly when they complain about the experience as if they would if they were helping them choose a product.

All complaints will be taken seriously investigated and justified conclusion .