Financial lobby group UK Finance has highlighted several points in the upcoming FCA Consumer Duty changes that the industry body thinks are not fully developed.
Last May, proposals were set out by the Financial Conduct Authority (FCA) to bring in an overhaul of the current Consumer Duty legislation in force.
Plans are to confirm a final ruling by the end of this July and give financial businesses a nine-month time window until April next year so that they can adopt the changes.
However, UK Finance yesterday expressed hesitance on the deadline given to companies by the FCA.
In a post written by Strategic Policy Manager Daniel Wraith, the banking industry body which represents around 300 businesses from the finance, banking, and payments sectors, shared that at least two years will be needed for all companies to prepare and impose the Duty. Adding on to that, Wraith revealed that although the watchdog’s desire to bring in the revamp as quickly as possible is understandable, success should not be dictated by the ‘temptation to cut corners’, and that any time saved would be a ‘false economy’.
Overall, UK Finance has been supportive of the FCA’s Consumer Duty overhaul plans since they were initially introduced. According to the lobby group, they will ‘enable the FCA to identify harmful practises more quickly and intervene before they become entrenched as market norms’.
Even so, the industry body has been actively putting out responses highlighting the flaws it sees in the watchdog’s strategy, ensuring that future changes will be in the best interest of the financial sector and its’ customers.
With the first FCA consultation paper made public in May last year, UK Finance released a letter of concern that proposals regarding the products and services to which the Duty would apply were unclear. The lobby group also questioned the lack of a clear description of the harms the Duty was intended to address.
This led to a second revised consultation paper published in December, for which UK Finance thinks that the FCA ‘is to be commended for’. However, more points were met with reservation by the industry body including the Duty’s proposed application to firms’ back books, the role of the Financial Ombudsman Service, together with the lack of proportionality in how firms will be able to evidence their compliance with the four desired outcomes.
Adding to the lack of clarity, Wraith said: “These risks will be exacerbated if implementation of the duty is rushed. The Financial Conduct Authority currently proposes to give firms just nine months to interpret its finalised requirements, assess their full suite of products and services against them and undertake change programmes, alongside changes to governance processes and IT systems that underpin them.
“This would be a tall order at the best of times, but especially so while firms continue to devote significant resources to supporting their customers through the financial impact of the pandemic. For lack of time to seek, firms might understandably opt for the lower-risk option of restricting access to some products and services – or even withdrawing them entirely – particularly where the requirements of the Duty are unclear,” Wraith concluded.