Senior members of parliament and peers in the House of Lords have reacted with disbelief to reports that the Treasury could push back against the consumer duty rules, FTAdviser has learned.
Speaking to FTAdviser, Baroness Ros Altmann, former pensions minister and now peer in the House of Lords, commented: "It would be wrong, in my view, to abandon these sensible plans for tightening consumer protection in financial services."
Reacting to a report in sister title the Financial Times in late February, in which Andrew Griffiths said consumer duty could wind companies up in red tape and spurious law suits, Altmann commented: "These remarks are pretty surprising and may have been taken out of context."
Similarly, Nick Smith, MP for Blaenau Gwent and member of the all-party parliamentary group on debt and personal finance, said he welcomed the FCA's efforts to strengthen the "core" duty of consumer protection.
Without confidence in a robust regulatory framework, consumers will be worried about engaging with financial services.Nick SmithSmith told FTAdviser: “It is concerning that the City of London Minister has been 'scathing' about the FCA's consumer duty during closed-door dinners with senior City figures.
"Personally, I welcome the FCA's efforts to strengthen this core duty, especially considering recent examples of its failure to adequately monitor financial markets and exercise their regulatory powers.”
The consumer duty rules, which aim to ensure fair value for financial services customers, are set to come into force on July 31.
But while some concerns have been raised since the dinner at which Griffiths made his comments - and general concerns around the direction of the UK regulatory regime post-Brexit - both Altmann and Smith have stressed the importance of work the Financial Conduct Authority has done to bring the consumer duty rules into force.
Altmann said: "Placing a duty on firms to deliver good outcomes for their retail customers surely should not be too much to expect and that they are being offered fair value.
"Many firms have worked hard and spend significant resources to ensure they will be ready for their important new duties by July 31, so why should those firms who are lagging behind and have not yet done enough work, be let off the hook?
"There is still time for all to ensure that they do change any practices that currently don’t meet the new consumer duty obligations and the FCA will not be imposing this duty retrospectively, which means the firms have had plenty of notice to make any necessary adjustments before the new rules start."
Strong support
Smith said his work on the Public Accounts Committee covering the British Steel Pensions Scheme first made him aware of the issues around a need to regulate that financial services companies are working in the best interests of consumers.
He explained: "In the BSPS case, the FCA consistently fell short of regulating the pensions market. It oversaw thousands of hard-working steelworkers transfer out of their defined benefit schemes when it was not in their best interests.
"The National Audit Office found the average member lost around £80,000 as a result. This comes alongside a whole host of other regulatory failures - Dolphin, Blackmore Bonds, and Safe Hands Plans come to mind.”
This is why he tabled an amendment to the Financial Services and Markets Bill that would require the Financial Services Consumer Panel to lay an annual report before parliament on their assessment of the FCA’s fulfilment of its consumer duty.
Many firms have worked hard and spend significant resources to ensure they will be ready for their important new duties by July 31.Ros Altmann, independent consultantAccording to Smith, this amendment has received strong support from across the house, and was co-sponsored by Conservative PAC colleague Sir Geoffrey Clifton Brown MP.
Smith added: “While the amendment was not put to a vote during the Commons Stages, the government heard our cause on the floor of the House, and was sympathetic during discussions. It has now been re-tabled in the House of Lords. Again, with strong cross-party support from both the Conservatives and Cross-benchers.
"This is why it surprises me to hear the Minister talking about how strengthening existing protections will damage the sector.
“For me, the contrary is true. Our consumers are our financial sector. Without confidence in a robust regulatory framework, consumers will be worried about engaging with financial services. Our economy cannot afford for that to happen. It is high time the FCA doubled down on this fundamental duty.”
'Not a subject for debate'
Altmann also joined her voice to those of financial advice veterans, who have been calling for greater consumer protections for Britons when it comes to their treatment at the hands of the financial services industry in general.
Speaking earlier this year of the importance of consumer duty, John Cowan, interim chief executive of the Sesame Bankhall Group, said: "Consumer duty is revolutionary", while Simon Harrington, head of public affairs at Pimfa, told FTAdviser that the regulations would usher in a "race to the top" in terms of professionalism and service levels for consumers.
Altmann added: "For far too long, consumers have been left inadequately protected in an industry where the asymmetry of information and understanding is a huge barrier to good customer outcomes.
"It is, ultimately, in everyone’s interest that consumers are treated better, that they are not subjected to unfair practices or excessive charges, or end up with unsuitable products because their financial services provider took advantage of their lack of understanding of its products.
"Expecting financial providers to treat customers fairly should not be a subject for debate; it should be axiomatic."
simoney.kyriakou@ft.com
