Is the UK government right to put consumer duty on the chopping block?
This morning, business secretary Jonathan Reynolds made one of this government’s targets for deregulation clear: consumer duty.
“On regulation, I talk to business people every day, as you would expect, and this is the biggest thing that they raise,” said the minister on ITV’s Good Morning Britain, while being interviewed by former shadow chancellor, Ed Balls.
“It’s not a request for for deregulation, for taking away these important things, it’s for regulators balancing those in the correct way against what needs to happen on growth.”
He offered up consumer duty as an example of a regulation that was not balanced against growth, only six months after the rule’s final deadline came into force.
The set of regulations was implemented by the Financial Conduct Authority in 2023, with all financial services companies now forced to “put their customers’ needs first”.
Reynolds’ attack on consumer duty came in advance of a meeting with a group of watchdogs today as he and Chancellor Rachel Reeves kickstart plans to cut red tape from the economy.
“An insurance company told me last week that the consumer duty, that’s part of what we put on to financial services … cost 20 times the impact assessment of what that would mean. And that is money that could have gone into jobs, to investment,” he added.
So, is he right on consumer duty?
Well, its implementation has not been wholly welcomed by the investment community.
A survey of financial advisers by Schroders last month found that regulation was now their primary concern, rising from 32 per cent to 49 per cent over the last year.
A significant contributing factor to this has been the introduction of consumer duty, with 42 per cent of advisers stating it has a high or reasonably high impact on their business.
Even customers haven’t been warming to it.
“We surveyed two thousand people one year on from the implementation of the FCA’s consumer duty and found most consumers have seen no improvement in how financial services companies treated them,” said Jacqueline Dewey, chief executive at Smart Money People.
Smart Money People found 81 per cent of customers in a vulnerable position had seen no improvement in how financial services organisations have treated them.
Of course, the process of implementing consumer duty across a lot of companies has proven to be complex and time-consuming, but the roll-out still doesn’t seem to have produced many results.
Instead, consumers have complained much more about not being able to talk to proper support, instead being shunted to AI chatbots or untrained staff, which are not covered by consumer duty.