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No 'duty of care' rule for financial firms for now - UK watchdog

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By Reuters
No 'duty of care' rule for financial firms for now - UK watchdog
FILE PHOTO: The sun sets behind the Canary Wharf financial district of London, Britain, December 7, 2018. REUTERS/Simon Dawson/File Photo   -   Copyright  Simon Dawson(Reuters)

By Huw Jones

LONDON (Reuters) – Britain’s markets watchdog has ruled out a new “duty of care” protection for consumers for the time being, saying it will focus instead on revising existing rules.

The FCA published a discussion paper last July on whether it should introduce a duty of care or a legal obligation on financial firms to take care of customers, with compensation payable if breached.

“The majority of respondents, from across the range of the FCA’s stakeholders, consider that levels of harm to consumers are high and there is a need for change to protect them better,” the watchdog said in a summary of responses on Tuesday.

Consumer groups and lawmakers want an overarching duty of care after scandals like the mis-selling of payment protection insurance and attempts by banks to manipulate interest rate and currency benchmarks.

Opponents of a new duty say that the FCA can already fine firms for breaching principles for ensuring fair treatment of customers, and have new powers to hold senior individuals to account.

Faced with a lack of consensus over introducing a new duty of care, the watchdog is leaning towards revising existing rules instead.

Regulation is also coming under the spotlight as backers of Britain’s departure from the European Union say that Brexit is an opportunity to cut “red tape” on financial firms to keep London competitive as a global financial centre.

“We know that consumer harm can be caused by different things, so there is unlikely to be a one-size-fits-all solution to any weaknesses in consumer protection,” the FCA said.

The watchdog said it will review how it applies its principles, and study a revision of these principles, including the merits of a potential private right of action for breaching them.

While a “duty of care” could have greater visibility, this was not a sufficient basis for making changes to the law, the FCA said.

“However, if, as part of our analysis, we take the view that there are substantive reasons for supporting a statutory duty, we will consider this further,” it added.

(Reporting by Huw Jones, editing by Ed Osmond)