Firms are needlessly ‘gold plating’ Consumer Duty rules, FCA policy director says
Scores of wholesale financial services firms are needlessly “gold plating” their compliance with Consumer Duty rules, the financial watchdog’s policy chief has claimed, as the regulator pushes back over concerns the rules have become too burdensome for businesses.
Charlotte Clark, director of cross-cutting policy and strategy at the Financial Conduct Authority (FCA), admonished companies who went “above and beyond” Consumer Duty requirements, warning that the approach was “not in the consumer’s interest.”
“Certainly within some firms we have seen this overinterpretation and gold plating over some of the compliance activity,” Clark told the Following the Rules podcast, adding that “things have to be done in a proportionate way.”
“Ultimately it’s not in the consumer’s interest for the firm to be doing additional work above and beyond, just to prove that the consumer’s needs are being met. That just adds cost to the system.
“People want to go above and beyond? That’s a matter for them, but we’re hoping that we’ll be able to clarify what are the expectations here.”
Reeves weighs in over Consumer Duty
The remarks come as the FCA prepares to set out a programme of work to “simplify” compliance with the Consumer Duty, a set of rules implemented in 2023 aimed at setting stricter standards of consumer protection across financial services.
In March, the FCA vowed to “address longstanding concerns” from businesses “about the length and complexity of our rules and guidance” in a bid to reduce the administrative burden the rules had placed on businesses.
The watchdog said it would seek to improve flexibility on how to implement the rules, “improve predictability” on its regulatory priorities and make the compliance process more efficient.
In July, Chancellor Rachel Reeves joined a chorus of businesses who warned over the onerous regulatory burden of the rules, urging the FCA to adopt a more pro-growth attitude.
“The Financial Conduct Authority’s consumer duty rules were also intended to raise standards in how finance companies treat retail consumers, but today affect the way businesses interact with other businesses — such as investment banks and asset managers,” she said.
“The Financial Conduct Authority will therefore assess how the consumer duty applies to these wholesale firms.”
Clark said the regulator had “done a lot of engagement” with wholesale firms to ensure the Consumer Duty was not needlessly complied with in areas where it was “not relevant.”
She conceded that there was a “certain onus” on the FCA to give greater clarity on how to interpret the rules to provide reassurance to businesses, ”rather than feeling like they have to go above and beyond in order to be confident that actually the regulator wouldn’t take action.”
“I’m not just saying to firms, ‘oh you’re overinterpreting the rules here’. There is something about us and our communication and us being clear about what is good enough here,” she said.