The regulator is concerned that financial services don’t always work well for consumers, and says the new plans will ‘fundamentally shift the mindset of firms’.

The FCA has opened a consultation on so-called ‘consumer duty’ rules that will put the onus on financial firms to provide consumers with information they can understand, offer products and service that are fit for purpose, and provide helpful customer service.

The regulator said that in the past some firms have presented information in a way that exploits consumers’ behavioural biases, sold products or services that are not fit for purpose, or provided poor customer support.

The FCA consultation takes on board feedback and engagement with industry and consumer groups following initial proposals published in May. It sets out more developed proposals for new rules to tackle the causes of harmful practices.

The new rules will raise industry standards by putting the emphasis on firms to get products and services right in the first place.

Joanna Elson CBE, chief executive of the Money Advice Trust, said: “The FCA is right to say that the financial services market does not always work well for consumers – many of whom have been placed at risk of harm or financial exclusion. Today’s proposals for a new consumer duty are welcome and – together with new vulnerability guidance published earlier this year – should provide greater protection for all consumers.

“I am encouraged to see the emphasis on product design and ensuring products are fit for purpose as part of these proposals. Ensuring good consumer outcomes are considered at the initial product design stage is an important step to preventing harm from occurring in the first place.”

Matthew Upton, director of policy at Citizens Advice, said: “Consumers should always receive good service for a fair price. Yet too often we see firms willing to risk a tap on the shoulder from the FCA, rather than playing fair from the get-go.

“We welcome these proposals, which should make firms think twice before going against the best interests of their customers. The FCA has made it clear that it is ready to take action against firms where needed. The intention of the duty is that this won’t be necessary as often as we’ve seen in the past, but the real test will come in whether it is willing to do it when it matters.”