A quick guide to the FCA treating customers fairly principle

Abbie Glossop Date published: Apr 06, 21

Treating customers fairly has long been a focus for regulators - the FCA treating customers fairly principle (TCF) was first introduced in 2006 back when the FCA was known as the Financial Services Authority.

Recently, the FCA has renewed their focus on how organisations treat customers. Last month, they issued new guidance on treating vulnerable customers fairly after COVID-19 and failings by financial institutions exposed a need for improvement. Meanwhile, the SMCR conduct rules further highlight the importance of customer relationships. Rule 4 states: ‘You must pay due regard to the interests of customers and treat them fairly.’

With the FCA encouraging firms to evaluate how they work with their customers, we’re revisiting the treating customers fairly principle. This quick guide will explain what it is and who it applies to, as well as how you can achieve the FCA’s requirements and demonstrate compliance.

What is the FCA fair treatment of customers principle?

The FCA fair treatment of customers principle, sometimes referred to as TCF, can be found in their handbook under section PRIN 2.1. This section contains 11 principles that firms must abide by, covering integrity, market conduct and more. Of these principles, number 6 relates to customers’ interests: A firm must pay due regard to the interests of its customers and treat them fairly. This is the TCF principle.

Who must comply with the TCF principle?

All FCA-regulated firms must have the TCF principle at the core of their business operations. This applies regardless of whether or not your firm has direct contact with retail customers, and regardless of your firm’s size, sector, or activities.

To help firms meet the principle, the FCA have set out 6 TCF outcomes that firms should work towards. If these outcomes are achieved, firms can be satisfied that they are treating customers to the required standards.

What are the FCA’s 6 TCF outcomes?

Outcome 1: Consumers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture.

Outcome 2: Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

Outcome 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.

Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances.

Outcome 5: Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.

Outcome 6: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

How can you achieve these outcomes?

You will need to show the FCA that treating customers fairly is a central focus of your business. Here are some ways you can do this:

Create a customer-centric business culture 

The TCF principle must be embedded throughout your organisation if it is to be effective. Senior management should lead by example and ensure that all business areas and staff understand what TCF is and are able to deliver fair outcomes for customers.

Be empathetic

Actively seek feedback from your customers and ensure that you understand their perspective and needs. Then, embed this understanding into your business strategy and operations. By taking on board their opinions and any complaints, you can make positive changes.

Pay additional care to your vulnerable customers

The FCA issued new guidance relating to the treatment of vulnerable customers, so it is imperative that you also understand the needs of your vulnerable customers and take this into consideration across all aspects of your business.

Put proper systems in place

Check that your resources, systems, policies, and procedures enable you to successfully meet the six TCF outcomes. If they do not, you should assess what changes can be made and implement these.

Review your services and strategy

Keep thorough records and regularly assess how well your products and services are performing. With robust monitoring in place, you can be confident that your firm, staff and any third parties are compliant. You can also ensure – and demonstrate to the FCA - that your customers’ needs are being met and that your strategy is effective.