For regulated financial services providers attempting to forecast regulatory priorities in the coming year, 2024 may be the “year of the consumer”. In particular, we expect the Central Bank of Ireland (CBI) to update the consumer protection regime in Ireland. In the UK, the focus will remain on applying the Consumer Duty. There will also be a continued regulator/legislative emphasis on access to cash and the need to maintain physical branches in the state.
The Consumer Protection Code
The CBI’s current review of the Consumer Protection Code (CPC) indicates that 2024 will be a year where the consumer will remain at the heart of regulatory priorities.
Commencing in 2022, the CBI began the process of updating the CPC. For consumer-facing firms, the CPC is the basis on which their interactions with consumers are regulated.
Following a discussion paper in October 2022, the CBI planned to publish a consultation paper on the revised CPC. This consultation paper was due to be released in Q3 2023. However, the timeline was subsequently pushed back to December 2023. The consultation paper is now expected in 2024.
As the updated CPC will be the basis of the CBI’s consumer protection regime, the consultation paper will attract considerable attention once it is published. We expect a number of industry comments and submissions on the proposals. We also expect the updated CPC to be a part of a broader CBI focus on the consumer in 2024. In speeches towards the end of 2023, the Governor of the CBI also stated that the regulator will focus on the digitalisation of financial services, and the introduction of competition into the market. Both of these are necessary to ensure good consumer outcomes. The CBI wants consumer protection to be at the heart of the digitalisation of financial services in Ireland. The CBI’s Director of Consumer Protection spoke towards the end of 2023, stating that the upcoming CPC review and the introduction of the Central Bank (Individual Accountability Framework) Act 2023 are part of the process of the CBI ensuring that the consumer is at the heart of commercial decision making.
The Consumer Duty
A similar focus is being placed on consumers and their protections by the Financial Conduct Authority (FCA) in the UK. The FCA introduced a ‘Consumer Duty’, which set a considerably higher standard for consumer protection in financial services than existed previously. The ‘Consumer Duty’ places an obligation on firms to deliver good outcomes for retail customers, with a particular reference to ‘four outcomes’ that the FCA aims to achieve. These outcomes relate to:
- Products and service
- Price and value
- Consumer understanding, and
- Consumer support
The Consumer Duty has proved to be an onerous requirement for UK firms. It obligates financial firms to act in good faith, avoid foreseeable harm and support customers in achieving their financial objectives. The introduction of the Consumer Duty has led to many firms updating their business models, including some high-profile instances of firms changing their pricing and product range to ensure customers were receiving the optimal outcomes.
It remains to be seen whether the proposed update to the CPC will include an Irish equivalent to the Consumer Duty. Even without going as far as introducing a potential Consumer Duty, the CPC could still increase the compliance burden on regulated firms that provide services to consumers in Ireland.
Access to cash and physical branches
This regulator focus reflects an environment where there is considerable political pressure to increase the protection of consumers within financial services. In the UK and in Ireland, there have been considerable political moves to protect consumer’s access to cash and to maintain physical branches of banks.
For example, in the UK the Labour Party, as a part of their upcoming election campaign, has promised to introduce banking regulation that would obligate the banking industry to provide cash services to all parts of Britain. In Ireland, there was a considerable public and political backlash when AIB proposed closing rural branches in Ireland. This led to the ultimate reversal of the decision to close those branches in order to ensure they serviced communities across Ireland.
There is a tension at the heart of much of these proposed changes between regulated firms as profit-making enterprises and firms being required to maintain consumer protection as a key priority. However, regulated firms can expect consumer protection to be at the forefront of regulators' priorities in 2024 and will need to plan accordingly.
For more information, please contact a member of our Financial Regulation team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.