The chief executive officer of the Financial Conduct Authority has said one of the aims of the consumer duty is to bring down the cost of the Financial Services Compensation Scheme levy.
Speaking at the UK Financial annual dinner last night (November 16), Nikhil Rathi said the regulator has set itself “measurable targets” to measure the impact and success of the consumer duty.
“We want to bring the FSCS [levy] down, reducing costs for you, particularly for small businesses,” Rathi said.
Other targets the FCA has set for itself include reducing the number of complaints going to the Financial Ombudsman Service, and measuring the change in the level of trust for financial services in its regular survey.
“Ultimately, meeting these targets and embedding the consumer duty are in firms’ interests too,” Rathi said.
“And after some heavy lifting upfront, it should also mean fewer reactive rules created by us in the coming years.”
The FSCS levy is a fee paid by firms authorised by the FCA and Prudential Regulation Authority.
Each firm pays an amount relative to its size, which contributes towards the running costs of the lifeboat scheme as well as the compensation it pays out.
The levy for 2022-23 was £625mn, lower than the FSCS had initially forecast.
However, advisers have criticised the fees, saying the system has been broken since it started.
Earlier this year, an FCA spokesperson acknowledged the increase in the FSCS levy over the past decade saying it reflects the large amount of unpaid redress liabilities from failed firms, which have then pushed onto those that remain in the market.
In his speech yesterday, Rathi said the FCA had introduced a phased deadline for the duty to help firms embed the “undoubtedly major cultural and operational shift”.
Many organisations are already doing much of what the FCA is asking for, Rathi added.
“Firms seem to be on track so we see no need for those deadlines to move again.
“We will remain pragmatic in our oversight of implementation and ask for continued openness from firms on their implementation path.”
Companies will have until July 31 next year to implement the consumer duty rules for all new and existing products that are currently on sale.
For closed book products, firms will have a further year, until July 31 2024, to conform to the duty.
The regulator has said this will give companies more time to bring older products, that are no longer on sale, up to the new standards.
The FCA previously said there would be an implementation date of April 30, 2023 but many firms complained this would not be enough time.
The consumer duty may prompt “risk aversion” in companies and even withdrawal of products for “difficult to reach group”, Rathi said, adding the FCA will be monitoring closely to make sure this does not happen.
“That is why the consumer duty has a particular focus on vulnerable consumers and taking reasonable steps to ensure informed decision making.”