The Bank of England and the City of London financial district in London, Britain, November 5, 2020.
The Bank of England and the City of London financial district in London, Britain, November 5, 2020. Reuters / John Sibley

Banks and financial advisers in Britain have called for more time to introduce a new 'duty of care', a landmark change in consumer protection to combat mis-selling and scams.

Last year the Financial Conduct Authority proposed a tougher and more comprehensive standard of care on firms, requiring them to put consumers' interests at the centre of their business to deliver "good outcomes".

The watchdog said it would finalise the new rules by the end of July 2022, and give industry nine months to prepare for their introduction.

"It needs to be at least two years to allow firms enough time to comply," UK Finance, an industry body for banks, said in a statement on Wednesday.

PIMFA, which represents financial advisers and investment firms, agreed said that nine months was insufficient time to change systems and processes, and that at least two years would be needed.

"This is an industry which has undergone an enormous amount of regulatory change recently which, in combination with the ongoing impact of COVID-19, means resources are already stretched," PIMFA CEO Liz Field said in a statement.

There is also uncertainty over how the Financial Ombudsman Service, which handles complaints against financial firms, will interpret the new duty, potentially opening the floodgates to claims, Field said.

In tweaked proposals late last year, the watchdog ditched plans requiring firms to "take all reasonable steps" in protecting customers.

A proposal to allow consumers to go to court for breaches of the new duty was also scrapped.

"Significant issues nonetheless remain, with attendant risks of stifling innovation, differentiation and competition, leading to product restrictions and financial exclusion," UK Finance said.

The FCA's cost benefit analysis on the proposed new duty finds costs to firms in the billions of pounds but does not quantify the benefits, UK Finance added.