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.

The FCA has renewed its focus on how organizations treat customers. In February 2021, it issued finalized guidance (FG21/1) on the fair treatment of vulnerable customers, because evidence showed inconsistencies in how vulnerable consumers were treated. 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. Here is 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 Handbook?

The FCA Handbook is the FCA’s collection of rules and guidance for the firms it regulates, published online in modules that include sourcebooks.

The FCA describes it in its payment services guidance as: “Our Handbook is an extensive document that sets out the rules and guidance for financial services regulation.”

A compliance officer checking a firm’s obligations will open the Handbook to find the Principles in PRIN 2.1, the conduct rules in COCON or the systems and controls rules in SYSC. Each module holds one area of the rulebook, so a question about fair treatment and a question about complaints send the reader to different places.

The FCA owns and maintains the Handbook. Its Handbook Notices state that the definitive version at any time is the version contained in the legal instruments, and that changes are added to the consolidated text on its website as soon as practicable after the instruments are published. Breaching a Principle makes a firm liable to disciplinary sanctions, and the Principles apply in whole or in part to every firm.

Handbook block Modules it contains
High Level Standards PRIN, SYSC, COCON, COND, APER, FIT, TC, GEN, FEES
Prudential Standards GENPRU, INSPRU, MIFIDPRU, MIPRU, IPRUFSOC, IPRUINS, IPRUINV
Business Standards COBS, ICOBS, MCOB, BCOBS, CMCOB, FPCOB, PDCOB, CASS, MAR, PROD, ESG
Regulatory Processes SUP, DEPP
Redress DISP, CONRED, COMP
Specialist sourcebooks ATCS, COLL, CREDS, CONC, CTPS, FUND, PROF, RCB, SECN, REC, EMIRR, SSR
Listing, Prospectus and Disclosure UKLR, PRM, DTR, DISC
Handbook Guides EMPS, OMPS, SERV, BENCH, BFSAG
Regulatory/Registry Guides COLLG, ENFG, FCG, FCTR, PERG, RFCCBS, UNFCOG, WDPG, M2G
Glossary GLOSSARY

TCF is Principle 6 of the FCA Principles for Businesses

The FCA fair treatment of customers principle, sometimes referred to as TCF, can be found in the FCA Handbook under section PRIN 2.1. This section contains 12 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.

All FCA-regulated firms must apply 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.

Principle 12, the Consumer Duty, requires a firm to act to deliver good outcomes for retail customers. To the extent that the Consumer Duty applies, Principles 6 and 7 do not apply, and the Duty applies in relation to a firm’s retail market business.

To help firms meet the principle, the FCA have set out 6 TCF outcomes that firms should work towards.

Six outcomes show what the FCA expects under Principle 6

  • 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.

Five practical steps help firms achieve the 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 organization 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 FG21/1, its guidance on the fair 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.

Fair treatment shows up in the Handbook, in culture and in the records a firm keeps

Principle 6 sits in PRIN 2.1 of the Handbook, the six outcomes describe what fair treatment looks like for customers and the Consumer Duty now sets the standard for retail business. Across all three, the practical point is the same for a firm: be able to show, from its records, its culture and its monitoring, that customers are being treated fairly, and check which Principle applies to each part of the business.