The FCA’s Consultation on Consumer Duty; and why it should be a Duty of Care

Register for the event

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When

Monday, July 5th from 6pm to 8pm UK time

Where

Online symposium via Zoom.

Format

There'll be a great line-up of speakers plus ample scope for discussion and debate.

Why this is such an important consultation; and why this is such an important symposium

This is a particularly important symposium, about a particularly important regulatory consultation.

The Financial Conduct Authority is consulting on the introduction of a new Consumer Duty, CP 21/13. Whilst we believe that introducing a Consumer Duty would be a step in the right direction, we also believe it is a long way short of what is really needed – a legally-enforceable Duty of Care.

The TTF has previously set out its thoughts on the need for a proper Duty of Care, see here, where we argue that only a legally-enforceable Duty of Care provides the consumer protections that are needed. 

Why this should be a Consultation on a proper, full-strength Duty of Care; not just a watered-down Consumer Duty

We believe that the FCA may be placing itself in breach of the law as a result of this consultation exercise, and that certain statements contained within its paper may have the effect of misleading respondents in a way that may jeopardise the integrity of their responses, to such an extent that they should not be relied upon in setting policy.

We make these points because CP21/13 exists because of an obligation placed upon the FCA in terms of section 29 of the Financial Services Act 2021 to consult on the question of whether there should be established a general rule that authorised persons should owe a duty of care to consumers. We are concerned that the consultation exercise currently being conducted by the FCA fails to address that issue and that, in consequence, the FCA may well be in breach of its statutory obligation.  

Our understanding of the legal obligation that the FCA has to Parliament regarding CP21/13

Section 29 of the 2021 Act states (among other things):

“29. FCA rules about level of care provided to consumers by authorised persons

(1) The Financial Conduct Authority must carry out a public consultation about whether it should make general rules providing that authorised persons owe a duty of care to consumers.

(2) The consultation must include consultation about—

(a) whether the Financial Conduct Authority should make other provision in general rules about the level of care that must be provided to consumers by authorised persons, either instead of or in addition to a duty of care,

(b) whether a duty of care should be owed, or other provision should apply, to all consumers or to particular classes of consumer, and

(c) the extent to which a duty of care, or other provision, would advance the Financial Conduct Authority’s consumer protection objective (see section 1C of the Financial Services and Markets Act 2000).”

It should be noted that section 29(2)(b) specifically requires there to be conducted a consultation on whether a duty of care should be owed by authorised persons to consumers. 

Thoughts about the Consultation

The manner in which the Consultation seeks to focus the question of a general duty of care is found in Question 12, which states:

“Q12 Do you agree that what we have proposed amounts to a duty of care? If not, what further measures would be needed? Do you think it should be labelled as a duty of care, and might there be upsides or downsides in doing so?” 

This question proceeds upon the narrative given at paragraphs 2.31 and 2.32. In particular, paragraph 2.31 states:

“What constitutes a ‘duty of care’ may have different meanings, and our existing rules already create different duties of care for firms. The generally accepted legal meaning of a duty of care is an obligation to exercise reasonable care and skill when providing a product or service and this is, for example, reflected in Principle 2’s requirement that a firm must conduct its business with due skill, care and diligence. In addition, section 49 of the Consumer Rights Act 2015 (CRA) implies into every contract for a trader supplying a service to a consumer a term saying that the trader must perform the service with reasonable care and skill.”

We believe there is a strong risk that both the question and the explanation are (literally) legally incoherent and inaccurate or, at any rate, severely misleading. 

The term “duty of care” is recognised to have a very specific meaning in law. It is of the essence of a duty that it creates an obligation on a party (A) which is owed to another party (B), breach of which creates a legal liability on the part of A to pay damages to B, in the event that B has suffered loss as a result of the breach of duty. It is clear that what section 29(2)(b) requires the FCA to do is to consult on whether such a duty ought to be imposed. To say (as paragraph 2.1 says) that “’duty of care’ may have different meanings” is, simply wrong, we feel, in that it is recognised to have only one meaning in law.

Two sets of topics to be covered at this event

For the first time ever, we will not only be covering issues relevant to the consultation that has been opened; we will also be covering the very basis upon which the consultation has been written, challenging the terms being used and shining a bright light on why consumers need and deserve a full-strength Duty of Care and why we should publicly reject the introduction of a watered-down Consumer Duty. 

This is definitely a “not to be missed event” and all are welcome to attend at no cost. 

Here's the programme and timings so far...

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