Amanda Khatri
Editorial Manager
The Financial Conduct Authority (FCA) has launched a review of the Consumer Duty after admitting some of the rules are too difficult for smaller businesses to understand and comply with.
Concerns about the “length and complexity” of the FCA’s rulebook prompted the regulator to open a call for information that will help it identify aspects of the standards that can be simplified.
The Consumer Duty was brought in last year, and while it only applied to new customers accessing financial services in the UK, the second phase which has now entered force, covers new and existing customers.
“A year on from the implementation of new Consumer Duty rules the FCA is examining its own rulebook, with the aim of stripping out any rules or guidance which create regulatory cost for no clear consumer benefit”, said Tom Selby director of public policy at investment platform AJ Bell.
Regulatory headache
This news will be welcomed as some organisations are still “lagging behind” with the Duty requirements, according to the FCA.
The boss of asset management giant Schroders, Peter Harrison, described the regulatory requirements as a “headache” which required “tens of thousands of pages of work”.
“This period of regulatory self-reflection…provides an opportunity to ensure the rules and regulations imposed on firms across various financial services sectors are fit for purpose”, added Steve Cameron, pensions director at Aegon.
In a livestream broadcast, the FCA also highlighted examples of positive impacts of the Consumer Duty regulation and shared future plans.
Looking ahead, the regulator wishes to see firms innovating and embedding the Duty into their policies and procedures to ensure effective competition, which will benefit customers, the firms and the wider economy.
“Consumer protection and growth are not mutually exclusive. They can and should be mutually reinforcing. We want to see inclusive, sustainable growth, where consumers have appropriate access to products and services that meet their needs”, said Sheldon Mills, Executive Director of Consumers and Competition at the FCA.
“This isn’t the beginning of the end, this is the end of the beginning,” Mills said.
What can firms expect
The FCA invites comments on the following issues:
- Which rules or guidance could be simplified to rely on other existing high-level rules or have similarities with other regulations that could be explained.
- How any steps to simplify our rules and guidance affect the FCA’s statutory objectives.
- Finding the right balance between high-level and more detailed rules.
- Potential benefits and costs from simplifying rules.
The deadline for responses to the call for input is 31 October 2024. The FCA then intends to outline its approach in early 2025.
Insurance sector falls short
The FCA is also unhappy at how the Duty has been introduced within the insurance industry, and has called on firms to improve.
Following a multi-firm review, it found several insurance firms were not collecting sufficient data to monitor outcomes.
“Firms that identify gaps in their compliance with our rules should act immediately, putting robust plans in place to address any shortcomings,” the regulator said.
The regulator said it may update regulations to shorten the onboarding process for new customers and allow space to create tailored products.
CUBE comment
The FCA watering down aspects of the Consumer Duty means further regulatory changes for businesses to monitor, manage and comply with.
Any firm liable for the Duty in the wealth, insurance and banking sectors will be impacted, and may want to consider leveraging innovative technology to assist and ease the burden of updating policies and controls.
CUBE’s Automated Regulatory Intelligence can help your business manage and implement the volume of regulatory change.
Think compliance, think CUBE.