The EPA rejects calls for additional consumer duty

The Emerging Payments Association (EPA) has hit back at the Financial Conduct Authority, emphasising that additional Consumer Duty would be unlikely to enhance the customer-centricity of those payments firms that are not providing sufficient value.

Releasing a paper containing its responses to the Financial Conduct Authority (FCA) CP21/13 “A New Consumer Duty” Call for Evidence, the EPA added that additional consumer duty will also add compliance and benchmarking costs to those that are already doing so.

In the paper, the EPA also questions whether Consumer Duty needs to apply to all firms in the payments industry, especially as most firms in the sector deal with other firms that also do not deal directly with retail consumers.

The consultation response details how the Price and Value outcome risks create an overly rigid framework, which could stifle growth and innovation, and may be detrimental to the users of payment services and e-money. Firms will need to be able to adapt to changes in market conditions and to react to the (often rapidly evolving) needs of their customers. Price controls are not an appropriate regulatory tool in this context, and it is likely to be extremely difficult for firms or for the FCA to demonstrate compliance or non-compliance with the proposed ‘fair value’ test.

Tony Craddock, Director General of the Emerging Payments Association, commented: “We’re really concerned that the FCA is trying to replace the marketplace. Its intentions are good – to get financial services firms to be customer centric and deliver the right products/services at a fair price. But by forcing firms to comply with a wide array of additional requirements to indicate that it is doing these things, the result could be less choice, higher prices, and less competition. Which is exactly the opposite of what the FCA is intending.”

More specifically, the paper fears the significant risks that imposing pricing controls could inadvertently undermine competition in the payment sector. The EPA community’s concern is that this proposal raises serious questions in relation to how the FCA would assess what is a ‘fair price’ and does not think that this is a determination that would be best or effectively made by a regulator. 

Although The EPA notes that the FCA does not intend to use the proposed rule itself to introduce market interventions such as price caps or other price interventions, it is very keen to ensure that the FCA does not use the proposals to establish pricing intervention powers or to nudge toward particular pricing models.

Max Savoie, Partner at Sidley Austin LLP and EPA Project Regulator Team Member, added: “This consultation generated a lot of interest from the EPA’s Project Regulator team and a broad range of EPA members. While we welcome the FCA’s focus on ensuring positive outcomes for consumers, we are concerned that the proposals have not been appropriately tailored to payment service users and providers. We hope the FCA will take the EPA’s response into consideration and continue to engage with the payments and fintech sectors as it develops regulatory policy in this area.”