Fintech ‘must not lessen consumer protection’
FINTECH is creating more efficient ways of borrowing and investing, but this must not be at the expense of consumer protection, the Financial Conduct Authority (FCA) has suggested.
The comments form part of the City regulator’s ‘Mission’, a series of documents explaining its approach to regulation.
The first paper, ‘Our Future Approach to Consumers’, states that the FCA wants to see markets where high-quality, good value products and services are sold in a clear, fair and not misleading way, taking into account the needs of vulnerable consumers.
The consultation highlights the role of fintech in bringing new firms into the market and developing more efficient ways for consumers to save, borrow and invest.
The FCA said it wants to use its regulatory toolkit to help to stimulate competition and drive innovation across all types of financial services.
But it added there must be a balance struck between promoting better outcomes for consumers while not compromising on protection “or the standards we expect from firms”.
When it launched its Mission earlier this year, the regulator described how fintech could be used to reduce the cost of financial services and extend access to vulnerable consumers.
The consultation paper also highlights the action the FCA has taken in the high-cost short-term credit space, such as capping daily interest at 0.8 per cent. It said the cap helps consumers avoid entering “a damaging spiral of debt”.
The regulator has consulted on including a requirement for firms to monitor customers’ repayment records and make reasonable efforts to intervene when they see signs of potential financial difficulties.
There are also restrictions on rolling over debt, strengthened risk warnings and changes to the way recurring payments are collected.
It comes after a survey of almost 13,000 adults by the regulator found many people have low financial resilience, with a fifth living on an annual household income of below £15,000 and 29 per cent saying they have no money put aside as rainy day savings.
Andrew Bailey (pictured), the FCA’s chief executive, said: “Today’s paper focuses on how we can deliver better consumer outcomes through our interventions and tackle the areas of greatest harm.
“There are limits to what we can achieve on our own. We will work with others – industry, government and other agencies – to address complex issues like vulnerability and financial exclusion.”
Read more: FCA chief outlines consumer credit concerns