Consumer Panel calls for new duty of care to protect consumers
20 October 2011
At today's hearing of the Joint Committee on the Draft Financial Services Bill the Consumer Panel set out its proposals for stronger consumer rights. These include adopting the US style Dodd Frank duty of care to protect consumers. Dodd Frank imposes a "fiduciary duty" on those retailing financial services to put the interests of consumers first and to ensure there are no potential conflicts of interest.
The Consumer Panel is also calling for greater transparency through a presumption in favour of publication of disciplinary action by the new regulatory bodies. It is seeking more effective competition powers for the FCA and greater accountability of the Bank of England to consumers, practitioners and Parliament
Adam Phillips, Chair of the Consumer Panel commented:
"The US authorities have led the way with the powers to introduce a duty of care under Dodd Frank. It is time that UK lawmakers followed suit with an explicit power for the new FCA to drive better behaviour from firms.
Fiduciary duty is already a well established principle in law. Given the requirement for consumers to take responsibility for their decisions proposed in the draft Bill, it is just and fair that those retailing financial services should owe a legal duty of care to their customers.
The financial services industry needs to regain consumers' trust. A stronger duty of care would go a long way to address the public's loss of confidence in the regulation of financial services following the litany of scandals in recent years."
- The Consumer Panel’s submission on regulatory reform can be found on our website.
- Fiduciary duty is defined in the UK as follows: A fiduciary relationship is one in which a person undertakes to act on behalf of or for the benefit of another who depends on the fiduciary for information and advice. A fiduciary would be subject to a number of rules against having conflicting interests with the consumer, not profiting at the expense of the consumer, undivided loyalty to the consumer and a duty of confidentiality.
- The Consumer Panel is a statutory body under the Financial Services and Markets Act 2000 and was initially established by the Financial Services Authority in December 1998. The Panel advises the FSA on the interests and concerns of consumers and reports on the FSA's performance in meeting its objectives.
- The emphasis of the Panel's work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA's remit. More information about the Panel's work is available on our website.