Financial Update: FCA seeking views on new duty of care to consumers
On 17 July 2018, the Financial Conduct Authority (“FCA”) outlined the measures it intends to take to protect consumers in the financial sector. As part of those measures, the FCA has published a discussion paper seeking views on a proposed new consumer duty of care to be owed by financial services firms. The deadline for responses to and/or comments on the discussion paper is 2 November 2018.
What is the discussion about?
Parties with an interest in this issue are asked to consider whether the existing rules are sufficient and effectively imposed, or whether the introduction of a new duty of care would help to close any gaps that could lead to consumers having inadequate
protection from harm. The FCA is also seeking views on whether breaches of the new duty and/or regulatory principles set out in the FCA Handbook should give rise to a right of action for damages in court.
At Ellis Jones Solicitors, we welcome this discussion, having acted for a number of clients who have felt inadequately protected by the FCA. We have, for example, dealt with a number of complaints against the Royal Bank of Scotland’s Global Restructuring Group (“GRG”) in recent years, after concerns that profitable small businesses had been artificially distressed and transferred to the GRG, in order for the bank to profit from their restructuring or insolvency. The FCA has recently confirmed that it is unable to act on the shortcomings of the GRG, due to much of its business being unregulated and therefore outside the scope of the FCA’s remit. The FCA’s powers to take action are therefore “very limited” in this area – a disappointing and unsatisfactory response for those consumers that had been caught up in the GRG’s actions.
The FCA has explained that the reasoning behind a potential new duty of care is to “enhance good conduct and culture and provide additional protections for consumers”. The paper sets out a number of different ways in which the new duty could be formulated and considers some possible issues of introducing the same. Parties are, amongst other things, asked for their views on how it would sit within the current regime, whether guidance would be needed to clarify the duty, and the impact of internal costs for regulated firms in having to re-assess their legal and regulatory risks.
What are the potential ramifications?
The extent to which a new duty would benefit consumers is unclear at this stage, particularly those with cases that can be dealt with by the Financial Ombudsman Service (“FOS”) rather than the court. However, consumers with cases that fall outside of the FOS’ scope may well benefit from being able to rely on a new duty of care that is specific to the actions of regulated financial services firms.
Whichever way you look at it, the main idea behind the introduction of a new duty of care is a good one. A long term cultural change within financial services firms and a reversal of the public’s negative perception of them is a welcome prospect, and something that has not been achieved by the existing regime. This firm alone has recovered in excess of £50million for a number of clients who have suffered loss as a result of the actions of financial services firms in the last few years. It is therefore
hoped that this paper will generate an important discussion about the adequacy of protection that is currently afforded to consumers, and recognise the need for change.
Who should participate?
In view of the potential ramifications, those with an interest in this issue should consider participating in the discussion and express their views. The FCA has indicated that interested parties might include:
- 1.Consumer groups and individual consumers
- 2.Industry groups or trade bodies
- 3.Regulated financial services firms
- 4.Policy makers and regulated bodies
- 5.Industry experts and commentators
- 6.Academics and think tanks
If you would like to get involved, please read the discussion paper and submit your views and responses to the questions listed in the paper by 2 November 2018. Details on how to respond can be found at page 34 of the paper.
What can Ellis Jones Solicitors do for you?
Ellis Jones Solicitors has received and acted for many clients in a large variety of financial disputes, to include the mis-selling
of a number of financial products, HBOS complaints and RBS GRG complaints, and are experienced in advising and dealing with such matters. If you wish to discuss a potential claim or complaint then please contact our team of specialist Banking and Finance Litigation solicitors on 01202 525333, who will be able to offer an initial free consultation.