By Alric Lindsay
On July 26, 2024, in the fifth sitting of the fourth meeting of the 2023-24 session of Parliament, members of the Parliament voted in favour of a motion brought by MP Roy McTaggart to introduce new consumer protection rules that local banks must follow. The motion also contemplates that the Cayman Islands Monetary Authority (CIMA), as the banking regulator, would conduct a review of the fees charged by local banks to determine whether such rates are fair to consumers.
Explaining the reasons for bringing the motion, McTaggart said, “by accepting this motion… we can hold banks to account and have them act more in the interests of their customers in seeing that they are protected as best as they can.”
Based on McTaggart’s speech, it is contemplated that local banks would be monitored for compliance with the new consumer protection rules in a similar way to how the United Kingdom’s Financial Conduct Authority seeks to enhance consumer protection under the Consumer Duty rules that came into force in the United Kingdom in July 2023.
Regarding the UK’s Financial Conduct Authority, it provided the following graphic to explain the “before and after” picture impact of the Consumer Duty rules:
Elucidating on the above, the UK’s Financial Conduct Authority said:
The Consumer Duty sets higher and clearer standards of consumer protection across financial services. Firms must act to deliver good outcomes for retail customers and cross-cutting rules provide greater clarity on our expectations. These require firms to:
- act in good faith toward retail customers
- avoid foreseeable harm to retail customers
- enable and support retail customers to pursue their financial objectives
The Duty also includes a suite of rules and guidance setting more detailed expectations for firm conduct in 4 areas that represent key elements of the firm-consumer relationship:
- the governance of products and services
- price and value
- consumer understanding
- consumer support
The Duty embeds a focus on consumer outcomes.
Firms must ensure that their customers’ interests are central to their culture and purpose. They must assess, test, understand and evidence the outcomes their customers are receiving on an ongoing basis. And firms must be proactive in acting where customers aren’t getting good outcomes. This supports healthy competition with firms competing vigorously in consumers’ interests.
It is contemplated that banks in the Cayman Islands will be subject to similar requirements as set out above, and any new Cayman rules are expected to achieve similar outcomes.
Parliamentary resolution passing motion
The first step to implement these requirements was the passing of the resolution of the Parliament.
This resolution reads as follows:
The question is, be it therefore resolved that the Government consider requiring local banks to implement a mandatory updated banking code of practice using the UK’s banking Consumer Duty rules as a guide to ensure bank customers best interests are adequately considered in banks decisions.
And be it further resolved that if the banks are unwilling to enter into such a sufficiently robust updated banking code of practice, the government should consider preparing legislation to provide for a higher standard of banks duty to customers using the UK’s banking Consumer Duty rules as a guide.
And be it further resolved that the Government considers urgently reviewing and bringing forward an update to the draft amendments to the registered Land act proposed by the Law Reform Commission based on their review of useful reforms of the law to deal with the enforcement of mortgage type security over real estate.
And be it further resolved that the Government consider requesting CIMA to review and report back to the Parliament by the end of this calendar year on the fairness of fees charged by retail banks and the fairness of interest rates paid on savings and other deposit accounts, ensuring that these rates and fees are fair and equitable for all customers.
The motion was passed after all members of Parliament voted in favour of the motion.
More about the UK’s Consumer Duty rule
For persons unfamiliar with the UK’s Consumer Duty rules referred to by MP Roy McTaggart, further details can be found on the website of the UK Financial Conduct Authority at https://www.fca.org.uk/publications/policy-statements/ps22-9-new-consumer-duty
