On 29 October Lord Sharkey introduced a Private Members' Bill into the House of Lords, which proposed amending the Financial Services and Markets Act 2000 ("FSMA") to empower the FCA to introduce a duty of care owed by authorised persons to consumers in carrying out regulated activities under FSMA (the "Bill").
The Bill proposed that a duty of care be defined as an obligation to exercise reasonable care and skill when providing a product or a service.
As Parliament is due to be dissolved for the general election, the Bill will now fall with other legislative business. However, it is interesting to note:
- The continued political desire for a duty of care to be introduced in the provision of financial services, despite most respondents to the FCA's Discussion Paper (18/5) not supporting a new statutory duty of care. See our earlier blog post for further details.
- The Bill proposed that "consumers" be defined by reference to the Consumer Rights Act 2015. This would limit any duty of care to the provision of regulated activities to an individual acting in his or her personal capacity (i.e. outside that individual's trade, business, craft, or profession).
- The difficulty in defining exactly what is wanted by those advocating for a new duty of care in financial services. As drafted, the Bill proposed to give the FCA a power that is arguably not required. Section 49 of the Consumer Rights Act 2015 already means that a bank supplying a service to a consumer is obliged to perform the service with reasonable care and skill. It is therefore not clear why it is necessary for the FCA to be given a power to introduce (in effect) the same obligation on financial institutions, although labelled a "duty of care".
In response to the calls for a new duty of care, the FCA had promised a further paper seeking detailed views on specific options for change to its Principles or how it applies the regulatory framework in order to deliver a higher degree of consumer protection. This had been expected in autumn 2019, but given the impending general election, this is unlikely to be published until December 2019 at the earliest.
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