Firms overcomplicate Consumer Duty rules, FCA says

Scores of financial services firms are unnecessarily “gold plating” their compliance with Consumer Duty rules, according to the Financial Conduct Authority’s (FCA) policy chief. The regulator is responding to concerns that these rules have become overly burdensome for businesses.

Charlotte Clark, director of cross-cutting policy and strategy at the FCA, criticised companies that exceeded Consumer Duty requirements, stating this approach was “not in the consumer’s interest.” Clark explained on the Following the Rules podcast that some firms have been overinterpreting and excessively complying with these regulations, adding that efforts should be proportionate.

Clark emphasised that unnecessary compliance efforts could increase costs without benefiting consumers. She noted that while firms may choose to exceed requirements, the FCA aims to clarify its expectations.

The FCA is preparing to outline a programme to “simplify” compliance with the Consumer Duty, a set of rules introduced last year to enhance consumer protection across financial services. In March, the FCA committed to addressing concerns from businesses regarding the complexity of its rules to reduce administrative burdens.

The regulator intends to enhance flexibility in rule implementation, improve predictability of regulatory priorities, and streamline the compliance process. In July, Chancellor Rachel Reeves joined businesses in urging the FCA to adopt a more growth-oriented approach, highlighting the impact of the rules on business interactions, including those involving investment banks and asset managers.

Clark noted the FCA’s extensive engagement with wholesale firms to ensure Consumer Duty rules are applied only where relevant. She acknowledged the need for the FCA to provide clearer guidance to reassure businesses, preventing unnecessary compliance efforts. “I’m not just saying to firms, ‘oh you’re overinterpreting the rules here’. There is something about us and our communication and us being clear about what is good enough here,” she stated.