In the paper, the EPA also questions whether Consumer Duty needs to apply to all firms in the payments industry, especially as most firms in the sector deal with other firms that also do not deal directly with retail consumers.

The consultation response details how the Price and Value outcome risks creating an overly rigid framework, which could stifle growth and innovation, and may be detrimental to the users of payment services and e-money. Firms will need to be able to adapt to changes in market conditions and to react to the (often rapidly evolving) needs of their customers. Price controls are not an appropriate regulatory tool in this context, and it is likely to be extremely difficult for firms or for the FCA to demonstrate compliance or non-compliance with the proposed ‘fair value’ test. More specifically, the paper fears the significant risks that imposing pricing controls could inadvertently undermine competition in the payment sector. The EPA community’s concern is that this proposal raises serious questions in relation to how the FCA would assess what is a ‘fair price’ and does not think that this is a determination that would be best or effectively made 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 very keen to ensure that the FCA does not use the proposals to establish pricing intervention powers or to nudge toward particular pricing models.

Further, the EPA believes the FCA should take care not to conflate 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 notion which does not take into account the complexities of human judgment or the different components of value such as service, user-control or feature flexibility, with the FCA becoming the arbiter of good and bad pricing structures under the guise of ensuring value.

The community’s response also considers the implications of private right of action (PROA). This proposal creates significant risks of legal uncertainty and incentivising overly defensive practices, given the breadth of the principles and the challenges of demonstrating compliance/non-compliance. The paper makes clear that this could be problematic as it could undermine the status of 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 in what circumstances customers would use it) and that establishing a private right of action could make a difference as to whether EPA members remain supportive of the Consumer Duty proposals on the whole, given the implications.

Overall, the EPA believes that the FCA's proposals are far reaching and will need to be thoroughly embedded by firms, and that the proposed timeline does not allow enough time for implementation. Systems and controls will need wholesale change, and policies and procedures will need to be tailored to the Consumer Duty requirements. Measuring outcomes will be complicated and difficult for both the FCA and for firms, and appropriate dialogue needs to take place to ensure that outcomes are being measured in an authentic and realistic way. The Financial Services Act 2021 requires that the FCA must, before 1 August 2022, make such general rules about the level of care that must be provided to consumers, but it does not require those rules to apply by that time, leaving open the possibility of a transitional regime.

Tony Craddock, Director General of the Emerging Payments Association, commented: “We’re really concerned that the FCA is trying to replace the marketplace. Its intentions are good - to get financial services firms to be customer centric and deliver the right products/services at a fair price. But by forcing firms to comply with a wide array of additional requirements to indicate that it is doing these things, the result could be less choice, higher prices, and less competition. Which is exactly the opposite of what the FCA is intending.”

Max Savoie, Partner at Sidley Austin LLP and EPA Project Regulator Team Member, added: “This consultation generated a lot of interest from the EPA’s Project Regulator team and a broad range of EPA members. While we welcome the FCA’s focus on ensuring positive outcomes for consumers, we are concerned that the proposals have not been appropriately tailored to payment service users and providers. We hope the FCA will take the EPA’s response into consideration and continue to engage with the payments and fintech sectors as it develops regulatory policy in this area.”