This deceptively important discussion paper, published just before the summer break, is both revealing and important in what it says about regulation today.
The idea of a Duty of Care – a new obligation financial services firms would owe to consumers – was discussed briefly in the FCA’s Mission consultation. But when the subsequent Future Approach to Consumers was published , the regulator said it had decided to push back consultation on it until after Brexit. At the time, I wrote that this kicking of the can down the road was unfortunate but needed to be seen in the context of the pressure exerted by Brexit work.
And yet here we have a discussion paper on the subject emerging only a few months later. So what has changed? The correct answer to this is probably a schizophrenic one – both a lot and not much.
Firstly, the argument that this is a clear change of speed if not direction, an acceleration of the timetable. Clearly this is the case, and it’s hard not to assume that a good deal of lobbying and, probably, some political pressuring has gone on behind the scenes. This is important not only in the context of a Duty of Care itself – the odds on its introduction suddenly look higher – but as part of a long term trend of conduct regulation becoming more politicised. Pensions and consumer credit are two obvious areas where this could again become tangible in the near future. Which raises other issues but I’ll leave those for another time…
But secondly, there’s the argument, also valid, that not much has changed. This is to a large extent a holding document, with little new thinking involved, most likely pulled it together at speed in order to get through FCA governance. But it does read as though the regulator is reluctant to move in this direction. The consultation, quite an open ended one, closes on 2 November, which means there won’t be a feedback statement until 2019. So this is still a slow burner.
Taking a step back, I’ve argued before that the combination of the increasing complexity of even “simple” financial products and the record of mis-selling and other poor treatment of consumers makes a strong case for a new Duty that makes the respective roles of firm and consumer much clearer than the current, unspecific, balance of responsibilities.
This situation feels outdated to me – as it stands, almost everyone is, in FCA terms, “vulnerable” at some stage - and does the industry no favours in the long run. But there are obviously some strong counter-arguments – for example, anything that further complicates regulation is arguably its own worst enemy.
Either way, there needs at some point to be a proper airing of the issues. This paper may not advance the argument greatly, and it doesn’t mean it’s going to happen any time soon. But it does indicate that it is more likely to happen properly. Which means, that, for those who haven’t yet begun, now is the time to start thinking…
The discussion paper explores if there is a need for a specific duty of care requirement for firms in financial services. It explores if a new duty of care could enhance good conduct and culture and provide additional protections for consumers. If changes are required the paper asks what those changes could look like and what the impact would be for consumers, firms and the FCA. It also explores what the possible alternative approaches to a new duty might be.