Tabling an amendment to the Financial Services Bill to ensure regulated businesses provide a level of ‘fiduciary duty’ to consumers, Chris Leslie, the shadow financial secretary to the Treasury, said it was necessary to “complement and enhance” the TCF obligations, which only “some firms” have been meeting.
“On its own, the initiative has failed to tackle a number of market problems that led to poor consumer outcomes, such as the payment protection insurance mis-selling scandal,” he said.
“I also have serious concerns about the mortgage and remortgage markets, where stronger safeguards need to be pursued, particularly on the best interests of clients.
“Millions of mortgage customers on standard variable rates, for example, might be persuaded that remortgaging is their only option in certain circumstances and would, perhaps unwittingly, fall into facing significant costs- costs arising from surveying, legal fees and so on.
“Because those costs are simply added to the mortgage in many cases, the customer does not necessarily feel then and there that they are being penalised or having to pay for a remortgaging product, yet those costs will hit them at some point. That is just one example of an area in which a fiduciary duty might be relevant.”
Leslie’s amendment was rejected by the Financial services Bill Committee, with financial secretary Mark Hoban saying he did not think a fiduciary duty provided a “clear means of ensuring that firms treat customers appropriately”.
He also said the use of the words, derived from common law, would “serve to complicate and potentially restrict the ability of the regulator”.
The Financial Services Consumer Panel had lobbied for the introduction of the amendment, saying it would ensure businesses act in the best interests of their clients, avoid conflicts of interest, not profit at the expense of the consumer, and have undivided loyalty to the consumer and a duty of confidentiality.
