FCA says all options on table ahead of possible phased implementation period for Consumer Duty

Last December the regulator detailed that it would introduce a consumer duty in order to drive a “fundamental shift” in the mindset of financial services firms.

It committed then to confirm any final rules ahead of the end of July 2022 with an implementation period ending on 30 April 2023.

However, last week the FCA revealed in the minutes to a board meeting that there could now be a switch to a phased approach.

The minutes, for the meeting held on 26 May, detailed the board had been given assurance that feedback from external stakeholders on the proposed rules and timescales was being addressed and associated risks mitigated.

“Although the rules would come into effect in July, there would be a phased implementation period (the specifics of which were to be discussed and agreed at ERPC [the Executive Regulation and Policy Committee]) which would allow firms to embed and deliver against the new requirements,” the minutes stated.

Adding: “The board highlighted the potential reputational risk that the duty would not come into force during the height of the cost-of-living pressures, where consumers would need additional protections the most. Options to mitigate this risk were discussed, including placing an obligation on, or signalling to sectors most impacted by the cost-of-living pressures.”

Feedback

An FCA spokesperson commented: “We have received extensive feedback from industry and consumer groups to the consultation question on the implementation period and are considering all potential options.

“No final decision has been taken on implementation. Our final decision will be made at our board meeting in July.”

New Model Adviser reported that the delay for financial services to implement the rules could be as long as six months.

The watchdog declined to go further than its statement when quizzed by Insurance Age on how long a delay could be or which factors, such as size of firm or sector, might be used to choose when each business has to implement the rules.

With all options still on the table the implementation period for brokers could still end at the close of April next year.

Preparations

David Sparkes, head of compliance and training at the British Insurance Brokers’ Association, advised brokers to keep preparing on the basis of the current known timeline.

“Crack on with preparations,” he stated. “If someone is early the FCA will never criticise them as they would do if they were late on delivering something.”

During this slight period of uncertainty ahead of the FCA’s next board meeting Sparkes said he had heard nothing “concrete” on the change but was hopeful the regulator was listening.

“The last time we spoke to them about it they did mention that they had heard loud and clear the requests for a longer implementation period,” he added.

The Biba leader noted that systems changes in particular could mean the need for a staggered approach and pointed out the same had been true for pricing practices when IT had needed reprogramming.

“That is often why a longer period is necessary,” he concluded.

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