By Charlie Conchie
The Financial Conduct Authority is expected to take swift action against firms that fail to comply with new rules to protect savers and retail investors, City lawyers have warned.
The City watchdog announced a major overhaul to consumer regulation last summer in the new Consumer Duty, which is set to shift greater onus onto companies to deliver “good outcomes” for consumers. The move has been described as the biggestshake-up to financial services regulation for a decade.
Changes to the rules are set to take effect at the end of July this year but the regulator warned last week that many firms were lagging behind and there was a “risk that they may struggle to apply the Duty effectively once the rules come into force”.
The FCA said last week that some companies’ plans to implement the new duty were still “lacking in detail” and “contain limited information about how the duty will be embedded”.
Naomi Seward, partner and head of retail finance at law firm Eversheds Sutherland, told City A.M. that she expects the FCA “to take swift and comprehensive enforcement action” against firms if they fail to fall in line.
Peter Bevan, global head of financial regulation at Linklaters, told City A.M. it was clear that consumer protection would be the regulator’s “number one priority this year”.
“It intends to intervene earlier and to make greater use of its supervisory and intervention powers in order to prevent harm and intervene before problems become systemic or practices become entrenched,” he said. “Once the consumer duty goes live in July, this areas seems ripe for early preventative supervisory interventions as distinct from enforcement (at least initially).”
Simon Morris, a financial services Partner with law firm CMS, said the watchdog would be monitoring the “market for early indications of consumer disadvantage” and requiring firms that are not up to scratch to “halt business immediately.”
“This policy reflects the FCA’s invigorated approach to preventing the widespread damage that can be caused by smaller firms with which it otherwise has little regulatory contact,” he told City A.M. “The introduction of the new Consumer Duty is likely to increase the use of this procedure as the FCA focuses even more on limiting unwarranted consumer detriment.”
The changes follow a slew of warnings from the regulator last year amid fears that credit firms and lenders were not providing property protection to consumers.
Mortgage lenders, credit checkers and insurance firms were among the sectors to feel the FCA’s sting last year as it fired preliminary warning shots and told them to ramp up their protection as Brits felt the squeeze of a cost of living crunch.
The FCA removed or amended over 8,000 potentially misleading adverts in 2022 – 14 times more than 2021 – as well as cancelling the authorisation of 201 firms for failing to meet minimum standards expected.
The post FCA to take swift action against firms flouting consumer duty rules, lawyers warn appeared first on CityAM.
