A clampdown is looming for City firms as the Financial Conduct Authority prepares to roll out its new consumer duty this summer, in the biggest shake-up of consumer protections in over a decade.
The new rules, which will come into force from 31st July, will set “higher and clearer standards” across financial services in a bid to safeguard consumers.
The plans have proved contentious, however. City minister Andrew Griffith has reportedly slammed the measures behind closed doors for tangling the firms up in red tape just as the government embarks on a deregulatory post-Brexit push.
But with fewer than 90 days to go until the new duty kicks in, the FCA has doubled down on warnings to firms to get their house in order or face assertive action.
“We will prioritise the most serious breaches and act swiftly and assertively where we find evidence of harm or risk of harm to consumers,” said the FCA’s consumer chief Sheldon Mills in a speech today.
“In some cases, firms can expect us to take robust action, such as interventions or investigations, along with possible disciplinary sanctions,” Mills said.
The regulator added that the “current cost of living squeeze makes it all the more vital consumers get fair value” and a push to offer better protection would boost competition in the sector.
What will change with the Consumer Duty?
The consumer duty will see the introduction of a new ‘consumer principle’, which requires firms to deliver “good outcomes for retail customers”, shifting a more responsibility onto firms.
The new principle aims to ensure firms deliver good outcomes for consumers on the quality and price of products and services, and make sure a higher standard of consumer support is provided.
The move marks a shift under the leadership of chief Nikhil Rathi to ramp up protections of consumers after the regulator was criticised following the collapse of London Capital and Finance and Neil Woodford’s investment fund.
The FCA has fired a volley of warning shots at companies lack of preparedness for the new duty since the start of the year.
In January, it said it was alarmed by the pace of preparation from some firms, adding that some were “further behind” in their thinking and planning.
Will laggards face punishment?
The FCA warned again today that some firms “have more work to do to meet the rules” and said they will face punishment if they fail to fall in line.
However, some experts expect the regulator to be more lenient with their early clampdown.
“The FCA have been crystal clear. Most firms are making good progress,” said Jake Green global co-head of financial regulatory at law firm Ashurst. “We expect the FCA to be proportionate with respect to their initial actions, but firms that are pushing it down the road have been well warned.”