UK Finance sets out concerns over consumer duty proposals
UK Finance has claimed the City watchdog’s consumer duty proposals contain “significant issues” and it will take at least two years for firms to comply.
In December, the Financial Conduct Authority (FCA) unveiled plans to introduce a new consumer duty by 31 July 2022 for all regulated firms, including peer-to-peer lending platforms.
All firms will be required to test and show that consumers are receiving good outcomes and that their communications are clear.
The consultation on these proposals closed yesterday (15 February) and the regulator expects to publish a policy statement summarising responses and making any new rules by 31 July 2022.
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UK Finance welcomed the changes the FCA has made since its first consultation on the duty, such as dropping the general requirement for firms to take “all reasonable steps” to avoid causing foreseeable harm to retail customers and enable them to achieve their financial objectives, and replacing this with “focusing on acting responsibly”.
However, the trade body said “significant issues” remain said there are extensive inconsistencies and tensions between the duty and current FCA handbook requirements.
UK Finance said given the time to review and adapt to the duty, the proposed implementation time is too short and it needs to be at least two years to allow firms enough time to comply.
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“The FCA rightly describes the consumer duty as a “fundamental shift” in its approach to regulation, and we have supported the intent behind the duty since its inception,” UK Finance said in its response to the FCA’s consultation.
“Done right, it will enable the FCA to identify harmful practices more quickly and intervene before they become entrenched. We welcome changes the FCA has made since its first consultation on the duty, which have reduced the risks of unintended consequences.
“Significant issues nonetheless remain, not least with respect to the implementation period, retrospection and interpretation by the Financial Ombudsman Service, with the attendant risk of financial exclusion.
“We also have significant misgivings about the FCA’s cost/benefit analysis. We and members are therefore keen to continue working with the FCA to address these concerns as it finalises its thinking on the shape and content of the Duty. We all want it to succeed.”