Hogan Lovells comments ahead of Consumer Duty consultation close

“The FCA has said that the new duty represents a ‘paradigm shift’ in its expectations of how firms treat their customers, but there is concern that it is moving forward without fully analysing the impact or the unintended consequences. In particular, shifting culture towards a more paternalistic one risks pushing firms to a risk-averse approach that would limit customer choice and may further marginalise the financially-excluded, without necessarily improving outcomes. 

“Implementing and monitoring the new duty will also be a very significant exercise for firms, but it is far from clear that it is going to add value. For example, the supposed harms that this duty would address remain unclear – nor is it clear why those harms cannot be addressed using existing rules. My concern is that it is a very blunt tool which is likely to reduce clarity for firms as to what is the right thing to do, and which - even without a private right of action - could be seized upon by claims management companies to justify highly speculative claims for redress. 

“Given the anticipated impact and cost, set against the potentially limited improvement to customer protections, it is not clear to me that the FCA has adequately made the case for change, and I share the concerns of others that the new duty may turn out in fact to be counter-productive.”