in , ,

Banks and insurers braced for deluge of litigation claims

litigation


Banks and insurers are warning that proposals to introduce stronger consumer protection rules may stop innovation and lead to a deluge of litigation from claims management companies.

Concerns are so grave about the “consumer duty” that some senior executives have complained to Treasury officials and are privately warning that they would consider bringing a judicial review to challenge the regulator.

The dispute stems from the Financial Conduct Authority’s launch of a consultation in May to create the new protection rules. Sheldon Mills, its executive director of consumers and competition, said at the time: “We want firms to be putting themselves in the shoes of consumers and asking, ‘Would I be happy to be treated in the way I treat customers?’ ”

Several financial firms are concerned that the FCA’s wording, particularly its suggestion that “a firm must act in the best interests of retail clients”, is vague and overly burdensome.

The FCA has also raised the prospect of introducing a new way to challenge firms legally through a private right of action, which critics believe could lead to a mass of court cases brought by claims management companies. Firms have until the end of the month to give feedback to the FCA. Some hope to use this process to warn the regulator that the plan needs significant change.

Rachel Kent, senior partner at the law firm Hogan Lovells, said that the proposed wording could lead to “challenges particularly around how to act in the best interests of customers where little is known about them”.

She added: “Firms would have to review many of their processes with little to help them understand what to test against.” That could lead to firms withdrawing products or avoiding serving vulnerable customers, she said.

The FCA is under pressure from politicians to beef up consumer protection, particularly after the London Capital & Finance mini bonds fiasco left thousands of investors with losses.

Some expect the regulator will water down the wording to balance its objectives of promoting competition, having a functioning market and consumer protection.

The FCA said: “Our consultation on the new consumer duty is intended to start a discussion about how the industry can more consistently meet the needs of customers in the future with dynamic, innovative products and services. We are working with firms, consumer groups and other interested parties through our wide-ranging consultation on these proposals.”



Source link

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

Loading…

0

Comments

0 comments

Boris Johnson

UK business urge Prime Minister to back a return to the office

The currency brokerage space is very competitive

The currency brokerage space is very competitive