CeMAP FRE2 Principles for Businesses, Consumer Duty & Conduct Rules question: lender for damages under FSMA

CeMAP FRE2Principles for Businesses, Consumer Duty & Conduct Rules

Alan believes his lender breached Principle 12 by failing to tell him about a cheaper product transfer. He wants to sue the lender for damages under FSMA 2000 s138D for breach of the Principle itself. What is the position?

A He can sue under s138D, but only once the FCA has fined the lender for the same breach
B He cannot sue for breach of PRIN under s138D, but he can complain to the lender and then the ombudsman
C He has no remedy at all, because the Consumer Duty can be enforced only by the FCA
D He can sue under s138D, because Principle 12 created a new private right of action from 31 July 2023

Show the answer and explanation

Answer: B. He cannot sue for breach of PRIN under s138D, but he can complain to the lender and then the ombudsman

PRIN 3.4.4R provides that a contravention of the rules in PRIN does not give rise to a right of action by a private person under FSMA 2000 s138D, and the Consumer Duty did not change that. Alan can complain to the lender and then to the Financial Ombudsman Service, which decides what is fair and reasonable taking into account relevant law, regulators' rules (including the Principles) and good industry practice (DISP 3.6.4R). The FCA can also take action itself.

Common mistake

Assuming the Consumer Duty gave customers a new right to sue.

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