The City minister’s damning comments on planned consumer protection rules are a case of the government criticising the Financial Conduct Authority “for doing exactly what [it] has told it to do”, a former top regulator has said.
City minister Andrew Griffith was reported to be scathing of the FCA’s planned consumer duty, which is set to come into force this summer and will require firms to ramp up their protection of consumers.
In private comments reported by the Financial Times, Griffith reportedly said the changes will tie firms up in restrictive red tape just as the government was looking to loosen the regulatory burden on the financial services sector post-Brexit.
However, the comments have come under fire from a former top FCA official today, who says that ministers are sending mixed messages on how they would like to regulate the sector.
“It is strange, but perhaps not that surprising given recent times, that a government minister is criticising the FCA for doing exactly what the government has told it to do,” Matthew Nunan, the former head of wholesale enforcement at the FCA and now partner at law firm Gibson Dunn, told City A.M.
“The FCA consumer duty is intended to ensure firms have a goal of delivering good outcomes for clients. To say UK regulated firms should not have such a goal imposed is the kind of comment that almost seems designed to demonstrate that the current government prefers large firms to individual consumers.”
He added that while the new duty will create additional work for many firms, it “should pay off” as consumers invest with firms that are “positively looking after them”.
Firms have been scrambling to fall in line with the new rules before they come into force in July, in what has been described as one of the biggest shake-ups to consumer regulation in a decade.
A spokesperson for the regulator said today the consumer duty would “bring about a cultural shift in financial services” and set “higher and clearer standards for firms”.
” We believe it will encourage innovation while driving competition and growth in the financial services industry in the UK,” the spokesperson added.
The comments FCA warned last week that much of the asset management sector was lagging in its progress in preparing for the plans and warned firms to speed up their preparation.
Sheldon Mills, the FCA’s executive director of competition and consumers, warned firms last week: “You still have time to deliver. But you must act now.”
Griffith is reported to have raised his concerns with the FCA and reminded the watchdog of its secondary objective to boost economic growth and competitiveness, the Financial Times reported.
Naomi Seward, head of retail finance at law firm Eversheds Sutherland, said the looming deadline and rule changes were adding to firms’ workloads.
“It is clear that the Consumer Duty does impose higher regulatory standards on firms; introducing for the first time a positive obligation on firms to deliver good customer outcomes for retail customers,” she told City A.M. “ Implementing and evidencing compliance with the Consumer Duty is, and will continue to be, a significant burden on firms.”
The Treasury was contacted for comment.