As reported by City A.M. late last week, the Financial Conduct Authority (FCA) seems to be looking to ease the burden for firms of complying with its strict Consumer Duty rules as part of a push to cut red tape and unlock growth.
In a letter to the Chancellor Rachel Reeves last week, FCA boss Nikhil Rathi said the regulator would drop a requirement for companies to have a “consumer duty board champion” and potentially hold off creating new consumer protections which may already be covered under the duty.
The consumer duty marked the FCA’s biggest overhaul of consumer rules and shifted the onus onto companies to deliver good outcomes for their customers. That said, the framework has come under scrutiny by firms and ministers for burdening City firms with red tape and a hefty compliance bill.
Commenting on the news, Financial Services Partner at law firm Harper James, John Pauley, says:
“The FCA’s recent letter to the Prime Minister marks a significant shift in regulatory priorities, signalling a potential relaxation in the regulatory burden of firms including consumer duty requirements. These developments raise a critical question: can regulators achieve the delicate balance between driving economic growth and ensuring fair outcomes for users of financial services, or will this result in an unavoidable conflict of interest for the FCA?
“The proposed changes, including the removal of the “consumer duty board champion,” greater flexibility in the Senior Managers and Certification Regime, and a reassessment of protections under existing rules, represent an effort to ease the compliance burden on firms. For businesses, this offers an important opportunity to redirect resources toward growth, job creation, and innovation.
“At the same time, the core purpose of the consumer duty—ensuring that businesses prioritise good outcomes for their customers – remains essential.
“The FCA has proposed some significant changes in relation to payments including the introduction of a new open banking method (variable recurring payments) that would presumably compete with direct debits and recurring card payments; and removal of the £100 contactless payment limit.
“Industry voices have raised valid concerns about the high costs of compliance, and the FCA’s more flexible approach could unlock much-needed investment. Combined with other initiatives, these adjustments may help spur economic activity without compromising consumer protections.
“The central challenge lies in achieving balance. Will these reforms empower businesses to grow and innovate while safeguarding consumers from harm? The FCA’s emphasis on competitiveness and innovation is encouraging, but preserving the trust that underpins the financial system is equally vital. Will changes simply be superficial measures that claim to be pro-growth but result in little actual change in the regulatory burden for businesses?
“This is a pivotal moment for regulators and businesses to prove that growth and fairness can coexist. The stakes are high, and the outcomes will define the next chapter for UK financial services.”
