The Government has rejected an amendment to the Financial Services Bill that would have required the regulator to take into account that consumers are responsible for their actions only when firms act in their best interests.
The bill, currently in the House of Lords, will break up the FSA, replacing it with the Prudential Regulation Authority and the Financial Conduct Authority.
The FCA will have a consumer protection objective, part of which requires it to have regard to “the general principle that consumers should take responsibility for their decisions”.
An amendment tabled by Labour peer Baroness Hayter would have added “provided that the relevant authorised person abide by the duty to act in the best interests of clients”.
The consumer protection objective also requires the regulator have regard to the “general principle that those providing regulated financial services should be expected to provide consumers with a level of care that is appropriate, having regard to the degree of risk in relation to the investment or transaction and the capabilities of the consumer in question”.
Hayter says as it stands, the bill puts a responsibility on consumers without an equivalent duty on providers.
Speaking in the House of Lords this afternoon, Treasury commercial secretary Lord Sassoon said: “It is a principle to which the regulators must have regard, it does not create a duty or impose any new obligation on consumers. It exists there to inform the way the authorities pursue their general functions and does not bite directly on individual firms or on individual regulatory decisions.
“I would suggest the amendment would only serve to dilute and perhaps confuse the way the authority has to have regard to consumer responsibility such that the regulator’s rules and requirements would have to envisage consumers do not have to take any responsibilities for their actions when firms do not act in their bests interests and I cannot believe that is right.”