Lisa Laybourn, Head of Technical Policy and Regulation, at The Investing and Saving Alliance commented on the close of the latest FCA consultation on the new Consumer Duty:
“TISA welcomes all efforts to improve consumer protection in retail financial markets. Consumer-friendly regulatory measures are needed to drive a healthy and successful financial services system in which firms can thrive and consumers can make informed choices about products and services. We support the FCAs ambition that the Consumer Duty will help make competition work more effectively, driving up quality and putting consumer at the heart of their business.
“TISA is concerned, however, the changes required in practice are significant and through the consultation process are proposing timescales that it believes will enable a considered and effective implementation. The FCA will need to ensure that the cost of change for firms does not fall on the consumer, result in raising barriers to market entry or disproportionate costs on smaller firms.
“A second concern we share with the industry is clarity, both when it comes to the extent of regulatory responsibility across the distribution chain and some of the terms of the new consumer duty. Guidelines around broad concepts such as ‘reasonableness’, ‘good faith’ and legal ones including ‘cause’, ‘foreseeable’ and ‘outcomes’ will need to be clear, tight and transparent, with a common understanding across the financial services ecosystem including the Financial Ombudsman Service.
“Where firms provide products which span across the remit of more than one regulator, such as the FCA and The Pensions Regulator, a joined-up approach or regulatory college is needed. This would help to ensure the same protection for consumers, irrespective of the regulator of the product.
“We are also concerned that without solving the advice-guidance boundary issues for firms, they will be limited in the contribution they can make in helping consumers achieve their financial aims. The introduction of the new Consumer Duty proposals could lead to conservatism among providers as they prioritise avoiding consumer harm over good outcomes, which could inadvertently create more financial exclusion.
“The new consumer duty is an opportunity to improve consumer outcomes, but a number of concerns need to be addressed beforehand so we can achieve that worthy aim.”