FCA promises to cut Consumer Duty duplication and confusion
The FCA has given one of its strongest hints yet that reform of the Consumer Duty is on the way and what direction it might take.
FCA chief operating officer Emily Shepperd says the main focus initially is likely to be removing areas of “duplication” and “confusion or over-prescription” which create unnecessary costs for regulated business.
The FCA is responding to recent feedback on the Duty which introduced sweeping reforms to customer treatment in 2022, with a requirement to improve communication and treat customers fairly at all stages of their journey.
In addition to this, the new Labour administration has promised to cut red tape holding back financial businesses and the FCA is responding.
In a speech to the UKSIF (UK Sustainable Investment and Finance Association) Leadership Summit at IET London yesterday, Ms Shepperd said the FCA was working at pace on reform to the Consumer Duty and was “listening.”
Some critics have said the extensive Consumer Duty requirements have made giving financial advice more expensive and pushed up costs for adviser firms and clients.
Ms Shepperd said the FCA had received over 170 responses to its recent call for responses to a Consumer Duty review and was listening to feedback.
She said: “We recognise that we can do more, so we are listening to firms and actively looking to refine the rulebook.
“When we introduced the Consumer Duty in 2022, it was a shift towards being outcomes focussed, with regulation that is proportionate, less reliant on granular rules and instilled with enough flexibility to be responsive to industry innovation.
“We are currently reviewing 172 responses to our Call for Input on the Duty. When we feed back next year, the aim is to address areas of duplication, confusion or over-prescription which create unnecessary costs for business, while at the same time demonstrating it is possible to pursue market growth through sustained consumer benefit.”
Ms Shepperd said she would take a similar approach to post-Brexit rule-making – “making sure regulation meets the UK’s needs while avoiding costly divergence.”
She said the FCA had proved it was pro business with a number of initiatives including its regulatory sandboxes - which allow new firms to test business ideas. She said these were the first in the world, with 95 regulators introducing similar models. The FCA had also recently launched an 'AI Lab' to help firms develop AI solutions safely.
At the FCA, she said when she joined she established Early and High Growth Oversight to encourage nascent firms into the right behaviours early and support their growth.
Supporting business was a high priority for the FCA, she said, adding that the regulator was, “avoiding unnecessary regulatory pressures and costs on businesses.”
According to Ms Shepperd the financial services sector continues to be one of the fastest growing in the UK economy. She said employment in the sector grew by 12.5% between 2010 and 2020 and in 2023 employed 2.3 million workers. Around two thirds of employment was outside of London too, she added.
The FCA itself is also expanding outside London and employs 500 staff across its Leeds and Edinburgh, equivalent to 10% of its workforce.