The Financial Services Consumer Panel (“FSCP”) has published a position paper on Brexit. Much of the current UK financial services legislation emanates from the EU. The paper considers which protections should be retained and identifies scope for improvements.
The FSCP notes that in some areas the UK has developed higher levels of consumer protection than are required by the EU, e.g. the Financial Ombudsman Service (“FOS”) scheme for ADR redress, high limits under the investor compensation scheme and the end to advice financed by commission which was brought about by the Retail Distribution Review (“RDR”). The FSCP also comments that the FCA is a leading regulator in Europe and passporting permits firms based in countries without such stringent regulation to sell lower quality products into the UK.
In considering scope for improvements by the UK, the FSCP says that the EU has been heavily focused on disclosure, an approach the FSCP considers out of date and liable to lead to consumer overload. Departure from the EU will also provide an opportunity for the FCA to become more transparent.
The FSCP lists various pieces of EU derived protections which it would like to see retained. This includes data protection, the requirements on assessment of creditworthiness introduced by the Consumer Credit Directive and general “fairness” requirements deriving from Directives on unfair terms, unfair commercial practices and distance marketing.
On supply issues, the FSCP warns that if EU firms need to apply for a passport to access the UK market, this may disrupt the supply of some products and services to UK consumers, leading to reduced competition and price increases. As such, the length and nature of the transitional regime is of considerable importance. Moreover, an economic downturn may result in debts being chased more aggressively and a constriction in the credit supply to SMEs.
It is recommended that post-Brexit the UK ensures that the FCA adheres to EU level legislation where consumer protections are stronger and cross-border regulation is more effective than having a purely national approach.
The position paper is available here.
The full review of the current position is available here.