Duty of Care – countdown to the much anticipated FCA consultation

Way back in 2019, the FCA published a Feedback Statement, summarising responses to its July 2018 Discussion Paper on the proposed introduction of a 'duty of care' and setting out its next steps.  In that Feedback Statement, the FCA said it would publish a further paper seeking detailed views on specific options for change. For understandable reasons, the further paper has been delayed, and delayed again, and again, and again.

Some will have noticed that our parliamentarians got tired of waiting and some pressed for a duty of care to be included in Financial Services Bill, recently enacted as the Financial Services Act 2021.

This was understandable, not least since one of the FCA's apparent hesitations in introducing a statutory duty of care was the need for primary legislation.  Here was such legislation and thus it was appropriate to seek to take advantage of the rare opportunity of Parliamentary time to introduce primary legislation.

However, after a lot of debate as the Financial Services Bill made its way through the Parliamentary process, rather than the clause which almost made it (which sought to introduce an obligation to exercise reasonable care and skill when providing a product or service), we ended up with, well, a timetable.  Section 29 of the Financial Services Act 2021 requires the FCA to:

• carry out a public consultation about whether it should make general rules providing that authorised persons owe a duty of care to consumers and publish its analysis of the responses before 1 January 2022, and
• before 1 August 2022, "make such general rules about the level of care that must be provided to consumers, or particular classes of consumer, by authorised persons as it considers appropriate, having regard to that analysis".

We are now expecting the much anticipated consultation this month.

Given the length of time we've been waiting, it's probably appropriate to remind ourselves what we can expect in the FCA's paper.

At its heart, the FCA is looking to assess whether the right balance is being achieved between firm and customer responsibility.

The recent debate in Parliament centred around concerns that banks exploit asymmetries of information and around the need for cultural change.

It remains pretty clear that the FCA consultation will not suggest a new statutory duty of care – not only because the window for primary legislation has now passed, but also given the April 2019 Feedback Statement which said that most respondents to the FCA's Discussion Paper (including both industry and consumer groups) did not support a statutory duty.

The April 2019 paper concluded that the FCA's primary focus would be on:

• reviewing how they apply the regulatory framework – particularly how they apply the Principles in authorisations, supervisory and enforcement functions, and how they communicate this to firms; and
• new/revised Principles to strengthen and clarify firms’ duties to consumers, including consideration of whether a potential private right of action for Principles breaches is appropriate, and what any unintended consequences of this might be.

This seems consistent with FCA Chair, Charles Randell's comments just last week in a speech about consumer outcomes when he noted:  "..we need to reset our expectations of how firms define the outcomes their customers can expect from their products and services and how they measure and demonstrate whether those products or services are producing those outcomes. We’ll be consulting on a New Consumer Duty that could embed this approach shortly."