Andrew Griffith, minister for the City of London, expressed concern that landmark reforms to prevent financial services companies from ripping off consumers could harm the sector and trigger a wave of bogus trials, putting it on a course of collision with the UK’s main financial regulator.
Griffith has criticized consumer duty, a key measure by the Financial Conduct Authority that since July requires banks, insurers and other financial services companies to prove they have acted in the best interests of their customers and produced “good results”. in areas such as pricing.
The heads of financial services companies have complained about the administrative burdens associated with the consumer duty, warning that it could trigger bogus lawsuits by opportunistic claims management companies who argue that customers with problems have not been treated fairly. fair way.
An industry source said Griffith was “caustic” about duty at a recent closed-door dinner with senior industry figures.
Another person briefed on the minister’s comments said he had strongly criticized the FCA reform.
Colleagues say Griffith is concerned that consumer duty will place new regulatory burdens on the financial services industry just at a time when the Treasury is trying to relax some City rules as part of a “Brexit gamble”.
While ministers called on the FCA in its 2021 financial services law to strengthen consumer protection, government experts said Griffith wants to avoid a “clearing culture” with vexatious claims.
They added that they wanted to ensure that the FCA listened to industry concerns and ensure that the new rules related to consumer duty were proportionate and clear.
Treasury declined to comment, but a government official said Griffith liked to have “frank and open” discussions with the industry.
Treasury did not deny that Griffith was concerned about consumer rights reform and raised it with the FCA.
Griffith reminded the FCA of a new “secondary” objective set out in the government’s financial services bill for watchdogs to promote economic growth and competitiveness, as well as maintain high regulatory standards and financial stability.
Ministers have the right to ask regulators to revise their rules, although ultimately watchdogs have the last word.
The Treasury said: “People should benefit from appropriate levels of consumer protection and it is right that the independent regulator should retain responsibility for meeting these standards.”
The FCA declined to comment on any discussion with Griffith about his concerns, citing the confidentiality of his dealings with ministers.
He said the consumer duty would “encourage innovation while driving competition and growth in the UK financial services industry.”
In a speech last week, Sheldon Mills, FCA’s head of consumer and competition, said that while some companies had made “excellent progress” in implementing the duty, “a small number of companies felt the task was too big.” and adopted a dodge tactic in the hope that it will all go away.”
“You must act now,” Mills said. “The July 31 deadline will not be moved.” Last year, the FCA gave financial services companies an extra three months to comply with consumer rights requirements due to industry concerns about implementation.
The government already has a thorny relationship with the UK’s main financial watchdogs after clashing with them over the so-called Edinburgh reforms, which aim to make regulation less onerous after Brexit.
In December, Griffith warned the FCA and the Bank of England’s Prudential Regulation Authority that they would need to improve their operational efficiency in order to deliver the “world-leading” standards that were “critical” to the industry and a “key priority”. for the goverment.