The UK’s Financial Conduct Authority (FCA) is reviewing its Consumer Duty regulations to ease financial pressures on businesses. Introduced in mid-2024, the rules aimed to enhance consumer protection but have created significant compliance costs for the financial sector.
Proposed Adjustments to Consumer Duty
The FCA is considering reducing regulatory requirements to lessen the burden on businesses. Key proposals include:
- Eliminating the mandatory “Consumer Duty Board Champion” role.
- Delaying additional consumer protection measures when existing regulations are deemed sufficient.
FCA CEO Nikhil Rathi outlined these potential changes in a letter to the UK Prime Minister, Chancellor, and Secretary of State. The letter emphasized the regulator’s commitment to maintaining high standards while removing unnecessary obstacles.
Costs of Consumer Duty Compliance
Since becoming mandatory in July 2024, the Consumer Duty rules have significantly impacted businesses. Industry reports estimate that companies incurred one-time compliance costs of £2.4 billion ($3.1 billion), along with ongoing operational expenses.
The trading sector, including forex and CFD brokers, has faced substantial challenges. Compliance with the FCA’s strict licensing rules, already among the most demanding globally, added financial strain. Brexit’s end further complicated matters by eliminating passporting rights, which previously allowed brokers to operate across the EU with a single license. Notably, none of the 100 EU-based CFD brokers with temporary UK permissions post-Brexit applied for permanent authorization.
FCA’s Focus on Industry Growth
The FCA aims to foster economic growth by reducing compliance costs and operational hurdles. Rathi’s letter highlighted plans to relax anti-money laundering (AML) and know-your-customer (KYC) requirements for small transactions. The FCA’s growth-focused strategy extends through 2030, with rapid consultations and research initiatives exploring the balance between regulation and industry development.
Looking Ahead
By revisiting its Consumer Duty rules, the FCA seeks to balance consumer protection with business growth. If implemented, these changes could provide financial relief while upholding the UK’s regulatory standards, supporting long-term industry expansion.
