FCA looks to ease consumer duty burden as Reeves pushes regulators for growth
The Financial Conduct Authority (FCA) will look to ease the burden of complying with its stringent consumer duty rules as part of a push to cut red tape in the City and unlock growth.
In a letter to the Chancellor Rachel Reeves this week, FCA boss Nikhil Rathi said the regulator would drop a requirement for companies to have a “consumer duty board champion” and potentially hold off creating new consumer protections which may already be covered under the duty.
The consumer duty, which came into force in 2023, marked the FCA’s biggest shake-up of consumer rules in a generation and shifted the onus onto companies to deliver good outcomes for their customers.
However, the framework has come under fire from scores of City firms and ministers for hamstringing the Square Mile with burdensome red tape and a huge compliance bill.
Speaking with ITV yesterday, business secretary Jonathan Reynolds said firms had warned him of the costs of complying with the rule and indicated ministers wanted to ease the burden it placed on firms.
“An insurance company told me last week that the consumer duty … cost 20 times the impact assessment of what that would mean. And that is money that could have gone into jobs, to investment,” Reynolds said.
The Treasury is looking to shift regulators onto a growth footing and Reeves wrote to 17 watchdogs on Christmas Eve demanding ideas to boost the competitiveness of companies within their remit.
The FCA’s proposals, sent in response to her request, also outline plans to lift the £100 cap on contactless payments and ease the deposit and income requirements for mortgage borrowers.
While the two main financial watchdogs, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), were given secondary objectives to consider growth and competitiveness by the previous government, they have come under fire for failing to embrace the mandate.
The FCA triggered backlash last year when it announced plans to ‘name and shame’ the companies it is probing, a move that was seen as conflicting with its secondary objective.
While some have raised concerns over the threat of deregulation and the watering down of financial safeguards, the Chancellor said in a speech in November that financial rulemaking had “gone too far”.
In his letter to Reeves this week, Rathi said the “deep reforms necessary” would require the regulator to “take greater risks” and “rigorously prioritise resources”.