Firms need time to implement FCA's consumer duty, says industry

Firms need time to implement FCA's consumer duty, says industry

The industry has called for certainty and more time to implement the Financial Conduct Authority’s consumer duty calling the proposed timeframe of nine months insufficient. 

In response to the second FCA consultation on the consumer duty, which closes today (February 15), trade association Pimfa, alongside providers in the industry, has urged the regulator to give firms more time to fully understand and implement the wide-ranging proposals.

Pimfa argued that while the FCA’s updated proposals carry more clarity for firms, there is still significant scope for subjectivity within them.

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It said the proposed implementation period of nine months is insufficient and does not reflect the importance the FCA has itself placed on the duty’s wider impact on financial services.

Liz Field, chief executive of Pimfa, said: “In our ongoing discussions with the FCA we have consistently asked for further clarity on the proposals that they have put forward. To their credit, this updated package of measures, in combination with the draft guidance produced, is clearer on the FCA’s expectations of firms.

“However, there is still scope for further clarity, and we have asked for updated guidance on a number of issues, as well as explicit statements of the expectations of firms. Throughout this process we have been clear our concerns around the consumer duty are less about the ability of firms to comply with it on an ongoing basis and more about the broader implementation challenge associated with, and the inherent subjectivity of, the proposals.”

Field added: “We do not believe a nine-month implementation period is sufficient for firms to ensure the systems and processes they have in place are sufficient both to measure consumer outcomes and provide the level of reporting distributors will now have to send upstream to manufacturers.”

Pimfa said it believes a two-year implementation period would be more suitable.

The FCA first set out plans for a new consumer duty in May, stating it was designed to create a higher level of consumer protection in retail financial services.

In a consultation paper published in December, the FCA said it would press ahead with its proposed new consumer duty, with an implementation date of April 30, 2023, nine months after final rules are due to be published in July 2022. 

At the time, the FCA said it would move forward with the proposals, despite concerns from some firms around their proportionality and design, as well as any potential consequences.

Phased approach

Responding to the consultation, Aegon called for the FCA to carry out a phased implementation and it set out a range of areas where it believes the regulator could support effective implementation by providing further guidance.

Aegon said the impact the rules will have on various sectors will vary significantly and urged the FCA to prioritise issuing sector specific guidance to make sure firms have full insight into where the regulator expects greatest change in each sector.