When the regulator initially raised the prospect of a statutory duty of care last year, it sparked a derisory response from trade bodies across the financial sector.
This week the FCA announced a host of potential changes to the regulatory framework in response to its consultation paper on the duty of care proposals, but opted against recommending a statutory duty of care for customers through parliamentary legislation.
Hand-wringing after the fact
Kate Davies, executive director at the Intermediary Mortgage Lenders Association (IMLA), said that the senior managers and certification regime (SMCR) needs to be allowed to “bed in and prove its effectiveness” before the FCA considers introducing any further new rules and regulations.
Davies noted that the whole point of SMCR – which is not being fully implemented until the end of this year – was to allocate responsibility to individuals when things go wrong, and argued that adding a general duty of care would risk blurring that.
She continued: “The FCA already has an immense array of tools and powers and must use them effectively, swiftly and decisively. Post-financial crisis, it noted that it would be becoming a more interventionist regulator that would examine how firms propose to do things and whether they have adequate risk management processes in place so as to ensure problems are mitigated before they happen.
“We think regulatory emphasis should be focused on this forward-looking strategy instead of hand-wringing about poor practice after the fact.”
We need proper enforcement of existing provisions
Christopher Lawrenson, head of legal services at the Building Societies Association (BSA), noted that the legal and regulatory landscape had been considerably strengthened since the turn of the century, particularly on the subject of individual accountability.
He agreed with Davies that these protections need time to “bed down and be tested”.
Lawrenson continued: “A complicated and overlapping framework of consumer protection laws, regulatory rules and EU-derived measures can leave today’s consumers bewildered about their rights.
“Adding a further duplicative and unnecessary duty to the mix would therefore be counter-productive for both consumers and businesses. What consumers need is proper enforcement of the numerous provisions that already exist.”
He added that while the BSA will “consider constructively” the FCA’s proposals, a simplification of consumer protections would be best, though he emphasised this should not mean a weakening of those safeguards.
Not dead yet
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (pictured), suggested that the FCA may have learned from its experiences with the buy-to-let market when it “moved too many dials at the same time”.
However, Sinclair noted that while the FCA has not called for a statutory duty of care on this occasion, that does not mean the issue is dead, as the consumer lobby will likely continue to call for one.
“We already have an implicit duty of care, so if any consumer felt we didn’t apply that they would have the right to challenge us through the courts or with an ombudsman. We don’t need to formalise it any more than that,” he concluded.
No ‘one-size-fits-all’ solution
Eric Leenders, managing director of personal finance at UK Finance, said that the trade body was supportive of the FCA’s vision of a well-functioning financial market, and highlighted its own work looking at how to serve customers better.
He continued: “We note the FCA’s acknowledgment that consumer harm can stem from a range of causes and that there is unlikely to be a ‘one-size fits-all’ solution.
“UK Finance and its members will continue to work closely with the regulator as it considers options to improve consumer protection in the most effective and proportionate way.”