FCA chief defends new consumer duty
Financial Conduct Authority (FCA) chief Nikhil Rathi has described the role the consumer duty and the Senior Managers and Certification Regime have, in making the financial services sector fit for the future.
Rathi said he was aware the consumer duty had caused concerns and that implementation was a burden on some firms but added that most of the industry was on track with implementation and he saw no reason for deadlines to change.
“We know that the consumer duty does not guarantee a good outcome: it leads firms to consider what that looks like and to take decisions in good faith”, he said at the UK Finance Annual Dinner yesterday evening.
“Firms must also give customers information that they can understand, point customers to products, services and post-sales support that meet their needs and offer fair value. These principles are not controversial.”
In terms of measuring the impact of the consumer duty, Rathi said the regulator has set measurable targets to reduce the number of complaints to the Financial Ombudsman Service, and to see an increase in trust for financial services in survey evidence.
“We want to bring the Financial Service Compensation Scheme down, reducing cost for you, particularly small businesses”, he added.
“Ultimately, meeting these targets and embedding the consumer duty are in firms’ interests too.”
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Looking ahead, Rathi said the consumer duty set the stage for a nimbler regulator in terms of technological advances.
“We want to work closely with you so that the consumer duty can help shape a framework for use of artificial intelligence and other new technologies”, he said.
“AI can help solve some of the issues highlighted tonight, such as spotting the signs of vulnerability, tailoring products to individuals and receiving accurate customer feedback and data.”
He said the consumer duty alongside the Senior Managers and Certification Regime would enable the FCA to create a framework that is able to respond quickly to innovations, so that new products can be trialled, with consumer interests as a priority.
“It will help us manage the entry of big tech firms into the UK retail financial service, ensuring a level playing field”, he added.
“Another principle which we can work on under the framework of the consumer duty is that agency must not be attributed to AI systems or algorithms, as these risk removing accountability away from firms.”
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Referring to the current cost-of-living crisis and ongoing challenges faced by vulnerable consumers, Rathi highlighted the importance of these consumers not being left behind as the digital services become more prolific.
“How you handle this period will determine the industry’s reputation for decades ahead and I know that the leadership of the industry and UK Finance understand this more than most”, he said.
“It is more critical than ever that borrowers and savers are offered fair and competitive rates. We welcome lenders and deposit takers who are moving in this direction.”
Highlighting the work the FCA has done on making Britain a crypto hub as well as maintaining its reputation across financial services, he concluded: “Together, we will make sure the UK is the best place in the world to do financial services business.”
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