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A Labour member of parliament (MP) has questioned the tangible benefit of scrapping the expectation for firms to have a Consumer Duty champion position on their boards in a new public hearing with the Treasury Select Committee.
During the hearing, Financial Conduct Authority (FCA) chair Ashley Alder and the regulator’s CEO, Nikhil Rathi, faced a barrage of questions about how the regulator can effectively shift its mindset to accommodate the government’s focus on growth.
They were also pressed on how payments issues can remain a priority once the FCA’s responsibilities begin to include those of the Payment Systems Regulator (PSR), which is set to be abolished by the UK government.
“Mr Rathi, you have obviously read the memo … but could that mean that, actually, the FCA are involved in a bit of virtue signalling?” asked Dame Siobhain McDonagh, a Labour MP on the committee.
Pointing out the scrapped Consumer Duty requirement, she noted that “it costs nothing, but it does concentrate the minds of boards on the consumer duty. So why do that?”
The Consumer Duty board champion role was introduced so that FCA-regulated firms had a designated, non-executive director responsible for overseeing compliance with the Consumer Duty rules.
The role was intended to focus boardroom attention on consumer interests, particularly during the implementation of the new rules in 2023 and 2024, but the FCA confirmed its scrapping earlier this year.
“You save no money and you save no bureaucracy. There is an opportunity for somebody on the board to have the responsibility to concentrate on the Consumer Duty,” said McDonagh.
Rathi responded that although the role had been useful during the rollout of the Consumer Duty, the FCA now believed it was appropriate to allow firms to decide how to manage governance.
“With the Consumer Duty fully in force, we felt that it was appropriate to give firms flexibility as to how they manage their governance. Boards remain responsible for the delivery of the Consumer Duty; that does not change,” he said.
“Whether you have a dedicated board member who is a champion or you wish to arrange it in another way, we will leave that to boards to decide.”
However, this did not satisfy McDonagh, with the MP stating that “you and I know that if everybody is responsible, nobody is responsible”.
Committee chair Dame Meg Hillier MP echoed concerns that removing the requirement could lead to accountability gaps. “You seem very confident that there is no risk to consumers, yet a lot of your work as a regulator is about being on the side of consumers.”
Rathi insisted that the regulator is “doing a huge amount with respect to our objective on protecting consumers” and defended the Consumer Duty work programme as “very thorough”.
“That data-led approach is how we will be supervising. We do not think that having one specific non-executive director is itself going to be the solution to making sure the duty is successful and delivers what we need it to,” he said.
FCA grilled over PSR merger
As covered by Vixio, the Treasury Select Committee has recently proven quite a fan of the PSR’s work.
This may be because it is relatively easy to see the benefits that the fraud reimbursement policy will have delivered to constituents, especially those that are vulnerable, like the elderly.
During the hearing, the FCA faced scrutiny from MPs over the planned integration of the PSR into its structure, with committee members questioning whether the move would enhance efficiency or stifle focus on payments.
Former City minister John Glen, who had oversight of the PSR during his time in government, challenged the FCA on how folding the PSR into the FCA would support the growth of the UK’s payments sector.
Rathi maintained that the merger aligns with global regulatory trends and will ensure coherence in oversight, but reassured MPs that the PSR’s critical work on areas such as authorised push payment (APP) fraud and open finance will continue.
Dame Harriett Baldwin MP, another former Treasury minister and previous chair of the select committee, also expressed scepticism over whether the APP fraud reimbursement scheme would have progressed as swiftly had the regulator already been under FCA control.
Alder insisted that fraud policy is already a key focus, regardless of organisational structure.
Committee members also pressed Rathi on potential cost savings, but he confirmed that no budget reductions had been factored in yet.
Instead, he noted that the PSR would retain its independent board until the necessary legislation is passed, which is expected to be by the end of 2026.
At least until that point, it will seemingly remain a priority for the Treasury Select Committee too, with Hillier concluding that “we will be looking at this quite a lot in future. Even if it is absorbed into the FCA, the committee will focus on the work of the PSR.”
