The Emerging Payments Association (EPA), which promotes collaboration and innovation in payments, today released a document containing community responses to CP21 / 13 “A New Consumer Duty” call for evidence. the Financial Conduct Authority (FCA), highlighting how another Consumer Obligation is unlikely to bolster customer focus for payment companies that fail to deliver sufficient value, while adding compliance and analytics costs comparative to those that already do.
In the paper, the EPA also questions whether the consumption obligation should apply to all companies in the payments industry, especially since most companies in the industry deal with other companies that do not. no longer directly with retail consumers.
The response to the consultation details how the outcome of price and value risks creating an overly rigid framework, which could stifle growth and innovation, and can be detrimental to users of payment and electronic money services. Businesses will need to be able to adapt to changing market conditions and respond to the (often rapidly changing) needs of their customers. Price controls are not an appropriate regulatory tool in this context, and it will likely be extremely difficult for companies or the FCA to demonstrate compliance or non-compliance with the proposed “fair value” test. Specifically, the paper fears the significant risks that the imposition of price controls could inadvertently undermine competition in the payments industry. The EPA community is concerned that this proposal raises serious questions about how the FCA would assess what a “fair price” is and does not believe it is a decision that would be. better or effectively taken by a regulator. Although the EPA notes that the FCA does not intend to use the proposed rule itself to introduce market interventions such as price caps or other price interventions, it is keen to ensure that the FCA does not use the proposals to establish price intervention powers or to guide specific pricing models.
In addition, the EPA believes that the FCA should be careful not to confuse the concepts of price and value. Consumers do not always see value in terms of monetary arrangements, and there is a danger of reducing the concept of value to a monetary concept that does not take into account the complexities of human judgment or the various components of value such as service, user- control or flexibility, the FCA becoming the arbiter of good and bad price structures under the pretext of guaranteeing value.
The community’s response also takes into account the implications of the private right of action (PROA). This proposal creates significant risks of legal uncertainty and incitement to overly defensive practices, given the scope of the principles and the challenges associated with demonstrating compliance / non-compliance. The document makes it clear that this could be problematic as it could undermine the status of the Financial Ombudsman Service (FOS) (FOS) was introduced as a redress mechanism for consumers, and therefore, it is not clear why this additional right is required and under what circumstances clients would use it) and that establishing a private right of action could make a difference as to whether EPA members remain in favor of the consumer bond proposals in the ‘together, given the implications.
Overall, the EPA believes that the FCA’s proposals are far reaching and will need to be carefully integrated by business, and that the proposed timeline does not leave enough time for implementation. Systems and controls will need to be completely changed, and policies and procedures will need to be adapted to meet consumer law requirements. Measuring results will be complicated and difficult for both FCA and businesses, and appropriate dialogue must take place to ensure that results are measured authentically and realistically. The Financial Services Act 2021 requires the FCA to establish, by August 1, 2022, such general rules on the level of care that must be provided to consumers, but it does not require that these rules apply to that consumer. moment, leaving open the possibility of a transitional regime.
Tony Craddock, Managing Director of the Emerging Payments Association, commented: “We are really concerned that the FCA is trying to replace the market. Its intentions are good: to get financial services companies to be customer-centric and provide the right products / services at a fair price. But by forcing companies to comply with a wide range of additional requirements to indicate that they are doing these things, the result could be less choice, higher prices, and less competition. Which is the exact opposite of what the FCA intends. “
Max Savoie, Partner at Sidley Austin LLP and member of the EPA Project Regulator Team, added: “This consultation has generated a lot of interest from the EPA Project Regulator team. and a wide range of EPA members. While we welcome the FCA’s emphasis on ensuring positive outcomes for consumers, we are concerned that the proposals have not been appropriately tailored to users and payment service providers. We hope that the FCA will heed the EPA’s response and continue to engage with the payments and FinTech industries as part of the development of regulatory policy in this area.