Andrew Griffith, minister for the City of London, raised concerns that flagship reforms to stop consumers being ripped off by financial services firms could damage the sector and trigger a wave of spurious lawsuits, putting it on a collision course with the main UK financial regulator.
Griffith criticized consumer duty, a key measure of the Financial Conduct Authority which, as of July, requires banks, insurers and other financial services companies to prove they acted in the best interests of their customers and produced “good results” in areas like prices.
The heads of financial services companies have complained about the administrative burdens associated with consumer duty and warned that this could trigger spurious lawsuits by opportunistic claims handling companies who argue that customers facing problems have not been treated fairly.
An industry source said Griffith was “forceful” about duty at a recent closed-door dinner with industry figures.
Another person briefed on the minister’s remarks said he was harshly critical of the FCA reform.
Griffith is told by colleagues that he is concerned that consumer duty will impose new regulatory burdens on the financial services sector at a time when the Treasury is trying to relax some city rules as part of a “Brexit opportunity”.
While the FCA was asked by ministers in their 2021 financial services law to beef up consumer protections, government officials said Griffith wanted to avoid an “offset culture” with vexatious claims.
They added that he wanted to ensure the FCA listened to the industry’s concerns and ensured that the new rules relating to consumer duty were proportionate and clear.
Treasury declined to comment, but a government source said Griffith enjoyed having “frank and open” discussions with the industry.
Treasury did not deny that Griffith was concerned about consumer rights reform and had raised it with the FCA.
Griffith reminded the FCA of a new “sub-goal” set out in the government’s financial services bill for vigilantes to promote economic growth and competitiveness, while also maintaining high regulatory standards and financial stability.
Ministers have the right to ask regulators to revise their rules, although ultimately watchdogs have the final say.
The Treasury said: “People should benefit from appropriate levels of consumer protection and it is right for the independent regulator to retain responsibility for providing these standards.”
The FCA declined to comment on any discussions with Griffith about its concerns, citing the confidentiality of its dealings with ministers.
He said the consumer duty “will encourage innovation while driving competition and growth in the financial services sector in the UK”.
In a speech last week, Sheldon Mills, the FCA’s head of consumer and competition, said that while some companies had made “excellent progress” in implementing the tax, “a small number of companies saw the task as too big and adopted a tactic. of evasion in the hope that everything will pass”.
“You must act now,” Mills said. “The July 31 deadline will not be changed.” Last year, the FCA gave financial services companies an extra three months to comply with consumer duty requirements due to industry concerns about implementation.
The government already has a rocky relationship with Britain’s top financial watchdogs after clashing with them over 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 have to improve their operational efficiency so that they could deliver the “world leading” standards that were “critical” for the sector and a “key priority” for the government.