Financial Services Bill — House of Lords, 2021-04-28
Topic: Domestic Commerce
Frederick Richard Penn Curzon (Conservative, Centre-right): My Lords, this Financial Services Bill will enhance the UK’s world-leading prudential standards, promote financial stability, promote openness between the UK and international markets, and maintain an effective financial services regulatory framework and sound capital markets. I acknowledge the work of your Lordships in scrutinising this important Bill. The issue of parliamentary scrutiny has been prominent in our debates and noble Lords have more than demonstrated the positive role that they can play in this regard During the passage of the Bill, Members of both Houses debated how best to address issues of consumer harm in the financial sector. Amendment 1, which this House approved on Report, proposes that this should be addressed through a requirement for the FCA to bring forward rules on a duty of care. Let me underline that the Government are committed to ensuring that financial services consumers are protected and that steps are taken quickly to address issues, when they are identified. However, as the Economic Secretary set out in the other place, the Government believe that the FCA already has the necessary powers and is acting to ensure that sufficient protections are in place for consumers, so I cannot accept this amendment It is important to remember that financial services firms’ treatment of their customers is already governed by the FCA’s Principles for Businesses and specific requirements in its handbook. These fundamental principles set out specific requirements for firms, including that "A firm must pay due regard to the interests of its customers and treat them fairly." The FCA’s enforcement powers allow it to ensure that these standards are met, but it recognises that the level of harm in markets is still too high. It is committed to taking further actions The Government accept, as the noble Lord, Lord Tunnicliffe, has rightly suggested, that this harm may stem from asymmetry of information between financial services firms and their customers. The risk is that some firms may seek to exploit this asymmetry. The FCA is well aware of how informational asymmetries and behavioural biases can influence consumer behaviour, and it works every day to address these issues where it considers that they may result in harm. The Government therefore support the FCA’s ongoing programme of work in this area and believe that it will deliver meaningful change for the benefit of consumers The FCA has considered its existing framework of principles and whether the way in which firms has responded to them is sufficient to ensure that consumers have the right protections and get the right outcomes. Building on this, in May, the FCA will consult on clear proposals to raise and clarify its expectations of firms’ actions and behaviours and on any necessary changes to its principles to deliver them. These proposals will consider how to raise the level of care that firms must provide to consumers, through a duty of care or other provisions. Ultimately, the proposals in this consultation seek to ensure that consumers benefit from a better level of care from financial services firms Amendment 1A puts this work on a statutory footing. It requires the FCA to consult on whether it should make rules providing that authorised persons owe a duty of care to consumers. It ensures that the FCA will publish its analysis of the responses to this consultation by the end of the year. It also ensures that the FCA will make final rules, following that consultation, before 1 August 2022. I hope that this provides reassurance of both the FCA’s and the Government’s commitment to this important agenda. I urge the House to accept this proportionate and, I believe, well-judged amendment The FCA will bring its consultation to the attention of the relevant parliamentary committees. This will give them an opportunity to consider the proposals and, if they choose, to express a view or raise any issues. The FCA will respond to any issues raised by parliamentary committees, in line with commitments made during the passage of this Bill Let me end there. I hope that noble Lords will accept Motion A and this amendment in lieu.