LONDON- Britain’s financial watchdog proposed new “consumer duty” rules for financial services to protect people from scams and mis-selling, which have tarnished the industry for decades.
Retail investors in Britain have suffered from mis-sold financial products, including endowment mortgages, pensions and payment protection insurance. Taxpayers are also having to help investors who suffered losses after the collapse of London Capital & Finance (LCF) investment firm.
The Financial Conduct Authority is proposing that financial services firms, which currently have an obligation to treat customers “fairly”, would in future explicitly have to act in the best interest of retail customers when selling products or services, or act to deliver good outcomes. The wording will be finalized after a public consultation that closes in July.
This would require a significant shift in culture and behavior for many firms who would have to demonstrate they took “all reasonable steps” to avoid foreseeable harm to their customers, the FCA said.
However, it stops short of the stronger statutory duty of care called for by some stakeholders to allow consumers to sue financial firms for redress.
Consumers currently must rely on the Financial Services Ombudsman, which was unable to compensate many LCF investors.
Under the proposed rules, firms that do no comply could face enforcement action.
