The regulator has called for feedback on its proposed new Consumer Duty regulation (CP21/13), which will consist of new principles and a suite of rules and guidance.
The standard of care the FCA wants to introduce would go further than the existing Principal 6 on treating customers fairly, and beyond the current Principle 7 on communications.
“It will require significant shift in culture and behaviour,” said Sheldon Mills, executive director, consumers and competition, at FCA.
The new regulatory concept puts greater emphasis on good customer outcomes.
The FCA is consulting on two sets of words.
Firstly, “A firm must act to deliver good outcomes for retail clients”. Alternatively, “A firm must act in the best interests of retail clients”.
Nisha Arora, director of consumer and retail policy at FCA, said: “They do have a difference in tone and we’d like to hear how they resonate with you, and which you think better reflects our policy intent.”
However Robert Sinclair, chief executive at the Association of Mortgage Intermediaries (pictured), said the move looked to be heaping unnecessary regulation onto mortgage firms, when few problems existed in the market.
“Instead of playing about adding more vague concepts, they need to get some feet on the ground and start regulating and supervising properly. They need to actually start doing the job they are paid to do, which is to supervise firms appropriately and properly, and to take action against those firms that are misbehaving,” Sinclair said.
He added: “They have all the tools in their toolbox to do it already. They don’t need more ideas, concepts or principles. I represent and operate in a sector that broadly does good things for consumers. If there is a problem they should be out here looking at it. They’re not, because the supervision teams don’t believe there are problems here.
“Please don’t impose a whole new layer of bureaucracy on us in order to deal with something that’s in other markets. We’ll end up spending an infinite amount of time producing documentation to evidence we are compliant with it. I don’t think fundamentally it will change the way people do their jobs today, because they are doing it properly already,” Sinclair said.
Suite of rules
Below the new Principle, there will be three cross-cutting rules whose purpose is to develop and amplify the standards of conduct expected under the Principle.
The first is to take all reasonable steps to avoid causing foreseeable harm.
The second, firms to take all reasonable steps to enable customers to pursue their financial objectives.
Finally, for firms to act in good faith, with conduct characterised by fair and open dealing.
Mills said that as firms’ use of online marketing and advertising, and data, had become more prevalent and sophisticated, there was “increasing risk of consumer exploitation or harm.”
“Firms have a much greater ability to analyse consumer behaviour and monitor exactly how they respond to different prompts and information, which can be used to take advantage of consumers’ behaviour,” he said.
The first stage of the consultation is open until 31 July 2021.